Ok I was curious to see what would happen if I published it.
The item icons show up in the inventory but they do not refresh to the blank icon. So basically if you pick up the cracked short sword and put it in the weapon slot a copy of the sword icon is still in the inventory even though its empty. If you pick up a helm from the ground it will draw over the sword icon in the inventory and then it will itself leave a copy of the icon in the inventory as many times as you move the item around. So I guess this might be the real problem.