After looking at it through the debugger, this stems from the fact that the titan guardian hammer has "hidden" flag on it for some reason. This is a utility flag which gets set on objects which are hidden with the "hide" command and are thus completely hidden from view until they are found with "search" which flips the flag bit. It shouldn't EVER be on inventory items for any reason.
I hardcoded it so that "hidden" can't be set on objects for any reason - once again this is a utility flag, not really something that should be set. I also added a bit of code to flip the flag on any inventory items which might have it on, on player log-in.
Idea for self: in the future, implement a utility bitfield for objects to put flags which imms aren't supposed to set.