I read that Items that spawn are instanced which is obvious but, what about items that are dropped by players? Will they become visible as soon as you drop it or will it have like a 1 minute instance to where if you don't pick it back up it will become available for all players to see and pick up. Or will ZoS take the WoW approach and only have the things destroyed if you try to drop them. Which brings up another question: will there be a physics system existent in the game. Ex: Drop an apple on the ground and see it roll down a hill. Or perhaps a Morrowind approach and have things able to drop and have no physics to them whatsoever. Discuss.

No one knows at this point except maybe the Alpha testers.

True but, what do you think it will be? I think it will either be a no drops kinda thing, or perhaps the morrowind drop system.

I highly doubt that things like, item physics will make it into the MMO adaptation of TES. It's the Elder Scrolls single player games, shoe-horned into an MMO setting. As much as people may like or dislike it, ESO will be a shallower experience (in a general sense) then any single-player ES games. Just the reality of the genre and not necessarily a bad thing.

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Precisely but, it might have at least a morrowind set engine with it being instanced only to the player and then have it disappear from the world after a set amount of time.