Then how is it that I have to pay upkeep for my dropped items? So both the dropper and whoever picks it up pay for the same item? That's a bug or unfinished feature.
No, you only pay for weapons that you spawn with. But if you pick up a weapon and don't drop it before the next round, you spawn with it, and so you will have to pay for it if it breaks.
There is a workaround for this, however, if you like to loot weapons often. If you turn autorepair off, you won't repair looted weapons. I actually considered making a character who only spawned with armor, and just looted a weapon every round.