Expected: When I give a belt strung with skulls to Alduk, he tells me about it and then returns it to me.

Actual: When I gave a belt strung with skulls to Alduk, he told me about it but did not return it to me.

Did not have the resources to try again with that specific item, but worked fine with a gaudy mask.

*snipped log*

You give a belt strung with skulls to Alduk.
You give XXX copper coins to Alduk.
Alduk tells you 'STUFF'
Alduk gives you a belt strung with skulls.

One thing that perhaps would help reproduce the issue is that I did not meet the requirement to buy the belt from the vendor that sells it, I had found it on the ground. Maybe that level-check caused an issue when Alduk was supposed to return it?

No level check thing in Alduk that I can see.

Not a bug: Alduk drops items on the ground when you do not have the inventory space or the weight capacity to have it returned.

Steps to reproduce:
Go to Alduk over weight capacity (have some -str debuffs on you) and give him an item.
He says something about you not being able to hold it so he will drop it on the ground.