I looked at this further.
If the item is a standard item (with a template number) then pressing the ring while carrying an item does nothing.
However, if the item is a unique, i.e. ss enhanced, special armour etc then it no longer has a template and therefore the carried item is destroyed.
I am not sure this was the intention of the original coders.
I have changed this so that converting gold/silver to rings chacks for carried items not carried items with template numbers.
This will be active next time the server is restarted.