True they are pretty realistic, if you drop something expensive they pocket it, if it's junk they give it back.
Guards get angry if you drop weapons.
A guard once walked up to me and returned an item I'd dropped, saying he should jail me for leaving dangerous things around like litter. I chose the options that basically mouthed off to him in response, and he fined me.
The scripting does trigger, but it's not just because you dropped something. It's probably something more like M'aiq in Oblivion, you could drop calipers around where he stops, and he'll search specifically for any calipers he can find at various breaks in his running about Cyrodiil. There's probably a lot of items that will get noticed and prompt some kind of response, and some that are especially keyed to generate a response with some people.
I've had items returned to me, I've had others mention how disgraceful I was in carelessly discarding equipment, and I've had a couple people ask if they could keep what I'd dropped.
I got a warning from a guard one day outside of Whiterun. He thought I was littering. Have you also ever heard the Guards tell you to sell your junk at bits and pieces? Maybe it's related.
NPCs will comment on things regarding your current disposition/condition. If you're weighed down with a lot of crap that you've accumulated in your travels, people will suggest going to the nearest general store to sell off some of it. If you run around with a magelight spell active over your head, people will "ooh" and "ahh" at the display. Once, a guy said "Pretty colors..." in a weird, dreamy kind of voice.