You are, the problem is how it's coded.
http://www.project1999.com/forums/sh....php?t=150023&
It wasn't until this bug post when mobs began to drop items they were given at all. The only problem is they will only drop those items if they are handed to the mob while charmed. Also if the mob you charmed handles any quest turn ins they will not drop any items handed to them even if charmed, as a concern for duping items by charming, completing quest and then killing to collect the turn in items were raised.
So yea you're correct but