This happened to me last weekend while doing Arachni's Haunt in HM with a few allies.
We had just finished the Dungeon, and Arachni's Chest had spawned. I was salvaging some of the items in my inventory into mats (since everyone else was leaving their white drops on the ground, I was gonna make the most of the opportunity and get some more mats!), and when I tried to salvage a blue scythe, I lost connection. I reconnected, and tried to salvage the same scythe again. Lost connection. Long story short, I am stubborn, and ended up losing connection/reconnecting a total of 6 times before I dropped the scythe and moved on to salvaging other items in my bags.
A guildie picked up the scythe, tried to salvage it, and it gave him the salvage menu. He canceled the salvage and dropped the scythe, I picked it up and attempted one last salvage. It allowed me to do so and did NOT disconn me that time.
I have no clue as to what it is, but I can tell you to drop the item out of your inventory and move on to salvaging something else, unless you are masochistic enough to want to continually drop your own connection.
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