In the Inventory Menu, define Hotkeys by holding one of the 1 - 8 Keys while simultaneously selecting the weapon, armor, spell, or item you want in that slot by Left Clicking the desired selection. Note, you can still change menus with the Hotkeys open, and the item will be assigned when you Left Click.
It says a lot about a game when you can't figure out how to drop an item without checking the manual.
Oblivion is a true, worthy successor to Morrowind. This means it's crashy and it has an interface which is counterintuitive at best. But it's damn pretty, and it tries to do everything. I can't wait to see how well it's balanced. If it has even half the gamebreaking issues that Morrowind does, it'll provide jokes for months.
When you're making a game like this you have to be really excruciatingly careful. Of course you want magic. Customizable spells? Hell yeah. Alchemy's pretty sweet. Item enchantment's quite neato. We'll need pickpocketing, and lockpicking, of course. How about steelsmithing? Maybe we should set up a bounty hunting system. Parasailing? Cliff scaling? Hey, we could add an entire game mechanic just for doing autopsies on dead things!
This is what Bethesda does. Every single time. Ten thousand game mechanics, and none of them are polished, and none of them are usable or balanced. In Morrowind it was Alchemy that was broken. Horribly, horribly broken. Gamedestroyingly broken.
The sad part is that none of the game works like it should. This game is supposed to have amazing AI. NPCs are supposed to have lives, and are supposed to carry out day-to-day actions. And yet, very early in the game there's a goblin in a tunnel. The game suggests you sneak up to him. So I did. And dispatched him with a single sword stroke. That was pretty cool.
Then I reloaded, equipped my lit torch, and "snuck" up behind him.
I tried casting several noisy healing spells behind him. No reaction.
I dropped an iron warhammer on the ground. CLANG. Then picked it up and dropped it again. CLANG. No reaction.
I launched a fireball past his head. Six times. No reaction.
I finally got him to react by attempting to push him into the bonfire. He noticed about halfway there.
This is not good AI. I've played first-person shooters that had better AI than this. This is a Bethesda special. They come up with a dozen awesome ideas . . . and then don't have time to finish any of them.
Please, Bethesda. I'm begging you. Attempt half as much next time. Don't try to cram everything into one game. I can tell you guys are good. This game is fucking beautiful, and you have an amazing universe. But please - next time? Write a game with half as much stuff in it, and finish it. I should not be able to find major flaws in the game within fifteen minutes of installing it.
Dropping an item, by the way, is shift-left-click. Just so you know.