The Elder Scrolls V: Skyrim

Npcs pick up items?

I was killing everyone in whiterun in werewolf form for fun and then i got killed and then one of the guards stole my staff of magnus and started using it , another time i was killing necromages and my follower took a staff off a dead mage and started dual wielding it with a sword, i didnt tell her to loot the body she just took it automatically, do all npcs take weapons that are better than their current one, or only in combat?

Eh kinda, i have seen things like this happen in my game but not alot, it not normally happens though it will happen time to time, though i have had once i droped items in a town then some random person came up to me asking if she could have the stuff i dropped so there is some times no telling what the npcs will do.