If I drag and drop an item to a character that is not selected the item seem to fizzle. It disappears. Now, it is possible that you don’t want to allow me to do this, although I would have expected the item to be equipped. But at least it shouldn’t just be lost :)
the item isn’t lost – it’s placed in the stash underneath the character portrait as if it weren’t were. You can find it again by scrolling down in the stash or using the ‘sort stash’ button. Dragging an item to a character this way will equip the item in the future, like you said.