Hey, feeling stupid about this but didn't think it would be an issue. I went to get a passwall ring (why? i have no idea...was just like, hey! i forgot to get that ring...) and had a level 35 weapon in my inventory, along with a number of assorted higher level weapons. Including an xr shortsword. Militia guy took the xr weapon....I do not have logs and I am not sure this is a bug but maybe a fair warning to other fellow adventurers will help alleviate the pain felt when a good weapon is munched!