Second and probably last part of my recollection of my favorite magic items from the various campaigns I've run:
Elf-Slaying Blade: In a very early session of a Rolemaster campaign, the group (joined together by a shipwreck) found a stash of treasure, having cleared out some psuedo-lizard men in a cave. What they found was pretty modest, but among the items was an Elf-Slaying blade. In Rolemaster terms this meant that the sword rolled criticals on a particularly nasty chart. Part of the background of the setting was that the current Elvish populace descending from slave/servants of awful and unholy Sidhe. So I'd put the sword there as a reference to that history and foreshadowing that perhaps the Sidhe might make an appearance later in the game.
One of players immediately went batso insane, since he was a half-elf and demanded that this group of people he'd been with for less than twenty-four hours destroy the item. An argument ensued about the relative evil or such a weapon, given that the power was fairly modest. It ended with the half-elf not getting his way. So, of course, during his watch he used his rogue abilities, stole the sword and threw it down the steam flue they were camping by. In the morning the group looked around, the tracker followed the tracks the ten feet over to the flue, and then the magician cast a resist heat spell and climbed down to retrieve it. No one said a word to the rogue. Ironically, the half-elf rogue died long before he had a chance to see the elf-slaying blade become useful in the later part of the game. It was one of those times where a small item led to strange interactions in the group.
Flaming Oil of Slipperiness: Had player who was particular unpleasant to NPCs on repeated occasions. After the group had managed to do some good, they spoke with an artifact and magic items dealer who offered them a few small rewards for their efforts. Before the guy can even get things distributed out, the problem player is whining and bitching about stuff and insulting the NPC. So naturally he doesn't get any gift. Which leads the player to shift gears and desperately and transparently try to suck up to the NPC. He finally relents and gives the character a vial of “Flaming Oil of Slipperiness”. The PC leaves with the group, cackling at his brilliance.
It would be several sessions before someone pointed out that any oil is in fact flammable and slippery.
The Nail of Silence: Rolemaster had a lot of interesting small items, and I enjoyed looking for those with no obvious combat use. The Nail of Silence created a 10' sphere of silence whenever it was driven into wood. That seemed like a decent item, one which could be used perhaps to cover a break in or for an infiltration. However, the group quickly found another use.
One character had a habit of saying whatever came into his head, regardless of the situation. Not necessarily insulting, but often revealing a little too much about the group's plans and weaknesses. The other player installed a block of wood on his backpack and one player had the assignment to jam the nail into the wood if the group was about to interact with an important NPC.
Kirst Arca: Another one from Rolemaster, an artifact weapon which was pretty puffy as I recall. I always enjoyed doling out toys since they really didn't upset the balance of power and usually made for more interesting combats. In any case, the player Alan happened upon the weapon while the rest of the group was battling it out with Vampires and Chaos cultists on the floors above. The group was under siege, with no apparent way out. Alan found both the artifact and a secret escape tunnel. I leaned on him pretty heavy “Wow...an artifact and your ticket home. You know if you go back upstairs to join your compatriots, this door will shut and lock...I mean, you've know those guys for what, all of two weeks...”. I could see him seriously thinking about it, but he turned me down, went back upstairs and the group managed to break out of the cordon-- with most of the group seriously wounded or near death. As exciting as that was, making Alan the player struggle with the tension between the delicious treasure/certain safety and having to help his friends was even better
So Kirst Arca (an axe IIRC) became Alan's signature weapon, the one he slept with and made soft pillows for. And it had a particular trick of being a 'limb-severing' weapon in Rolemaster-- meaning if he got a limb specific hit on the charts it would lop off. Which Alan did, repeatedly, throughout the campaign, but always and inevitably leg hits. I'm not sure if it was an accident of the charts or what, but he left behind him a trail of one-legged bad guys all the way up to the end.
Wound Transferring Wand: I really don't think I can do justice to this item. Or at least I can't do justice to the session in which it really came into play. The item itself was a little suspect- essentially it allowed someone to touch another person and switch wounds with them. Scott, who ended up with the item got called to a secret meeting. A friend of his had been kidnapped in order to secure Scott's cooperation. Scott instructed the rest of the group to stay back as he'd been ordered to come alone. Scott entered into the basement to be faced with his friend tied up and several bad guys, one with a knife to his friend's throat.
Even as they began to negotiate, the rest of the party waited at the top of the basement steps in secret. Then Sir Crank “accidentally” fell down the stairs. The situation went immediately pear-shaped, and the bad guys cut Scott's friends throat. Even as the blood began to spray, Scott shot froward and touched the wand to the tied up man, taking the horrific throat wound onto himself. And then things got ugly. There followed a chaotic melee filled with a variety of fumbles-- with the gushing neck wound flying from person to person-- essentially they'd get hit with the wand, blood would spray a fumble would occur and then in the confusion someone else would get hit from it. At one point Dave's character, who'd been tunneling in another way using an elemental, slid down in and immediately got hit with the wound. It was a bizarre confluence of mayhem and fumbles, but with the group managing to finally hit one of the baddies with it and making it stick.
The Summons Stone: A pretty clever item, I'm pretty sure came from a supplement. When activated, the stone would suck a target into it, storing it in stasis. However, only one target could be stored in the stone at a time. When another was placed within, whoever or whatever was in it at the time would be released. (I think any target could only be hit by it once). They had found the stone and then in the middle of a particularly deadly dungeon level they used it on some big creature, only to release a really potent child of an evil race. He'd been stuck in there by a rival thousands of years before. Luckily the kid had no concept of what was happening, so the group managed to turn him at least neutral (and prevent him from zotching the whole group).
Of course later on when they needed to use the stone again, they had to let out the monster and fight it-- which happened a couple of times. In the end they found the item more useful for sneaking people past guards or over borders. It was a potent item, but with a decent drawback.
The Necklace of Ilvir: I've used the Harnic pantheon in other contexts for a long time-- long enough they my conception of them has significantly shifted from the original material. Ilvir in the game is a figure of change, but also of tricks-- almost always to undercut another persons position, self-image or role. So when, Barry the half-demon found what was clearly a relic of Ilvir, a necklace, he should have been more wary.
Instead, his character threw it on. A promptly became fully human, which was not something he wanted. Especially when he got back to the group and found his demon mount now wanted to kill him. There was much gnashing and wailing, made worse because his character didn't know how to cry and more let out a long, unmodulated shriek.
Still later in the campaign, Barry found himself in the house of another player's (Derek) family. Barry was introduced to Derek's brother, sick and suffering from wounds he'd suffered in battling the undead. So, when Barry found himself alone with the injured brother he threw the necklace over him. And the brother promptly turned into a bird and flew away. Again, not what he'd expected. Barry left quickly and never told anyone what had happened.
The Golden Disc: Rolemaster has delving and attunement as easy ways to determine how a device works and what it does. GURPS has fewer of these options, or at least a character needs to be built for that kind of information. The party, after a series of really awful battles had finally come to a treasure vault, filled with magic items. Some were pretty obvious, the blades, for example. But others were less so. One player, Barry, determined he was going to figure everything out by trial and error. After working through, he was left with a single object, a two foot wide apparently metal disc. He spent about a half hour of game time trying various things, desperate to unlock the secrets of the disc. Finally he threw it. At which point it flew away, out the door and vanished.
I turned to Barry who was still processing what had happened. “Who does your character hate?”
“The Thonak,” he answered a little too quickly. You see, the Thonak was essentially the Sauron of the campaign, the big bad sitting in the evil land, dispatching armies out. Barry's eyes went wide when he realized what he'd done. [Cut to imagined scene of the Thonak addressing his troops when suddenly he's beaned by a big metal frisbee].
Ironically, the when the group left the dungeon, the magic on it made them forget they'd been there-- all they knew was that they'd appeared in the desert with a bunch of loot. And Barry's character didn't remember that he'd sent a seeking disk after the Big Bad. That came back to haunt him later when the Thonak killed him, ripped out his soul and mounted it in the disk on his wall.
Holy Grail as Coke Bottle: One of my favorite bits in the City of Ocean campaign was lifted from Ken Hite's Suppressed Transmission articles. Barry and Shari's characters got involved with an art exhibition revolving around images of the Holy Grail-- especially images outside the Arthurian Mythos. As the show started to come together, it gained power, resulting in it becoming a hot spot for jumped up mages and those who wanted to control the destiny of the city. In the end they realized/managed to make a Coke bottle into the Holy Grail-- based on a number of mythic associations. (Thanks to Shari for reminding me of this)