There is a map segment limit of 118 (or 128 if I miscounted). Each piece of the map can hold 118 things. At that point, things start disappearing - non "you need this" items only.I have also had stuff vanish after not playing a savegame for a long time. Did they add a timer or something ?
I never had it crash on an overload. Maybe you should collect up some of the stuff and sell it in New City ? Were you dropping more than one item at once ?
I found the drop limit by over-exploiting the Mystery Menus, an undocumented testing feature (YES IT IS, I'm right and my detractors are WRONG) that only works on version 1.0 and not for everyone. I think you hit shift uparrow, down, left or right arrow and a menu of (junk or useful) items pops up. Drop an unidentified item, then pick it up. Sell the stuff to a vendor and be amazed at the price they offer. Also try shift < or >, that menu can produce a light sword.