Miners, woodcutters, soldiers etc... all try and pick up equipment, unsuccessfully pick them up, walk away, then try and pick them up again. Nothing I have tried has fixed it (including restarting DF, drafting/undrafting, removing labor then adding it back in, etc...). Strangely enough, when doing specific jobs (e.g. woodcutting, mining), the equipment is picked up. I have not tried armor.
Ignore the orcish siege and dead bodies lying around. That was my bad (e.g. forgetting to set 'duergars (the race I'm playing) stay indoors' when an orcish siege arrived).
I'm not sure whether or not the mod has caused it; I wouldn't think so, given that it hasn't completely barred duergar miners and woodcutters from picking up their equipment; only when they have no job afterwards do they fail to successfully pick up the piece of equipment. I'm using modified version of this mod:
http://www.bay12games.com/forum/index.php?topic=36547.0 (Dwarf Fortress Rebalance, changes mostly superficial to names, with the removal of the new metals and a few weapons), combined with
http://www.bay12games.com/forum/index.php?topic=35584.0 (Molten Rocks), a plant mod (forgot which one it was), and a few of my own tweaks (a few new reactions).
As a side note, the armorer with the fey mood also refuses to pick up the fox bones near the butcher's workshop for some reason.
A save game (with all of the mods I'm using) is here:
http://dffd.wimbli.com/file.php?id=1112