removes all your items in Hordes? I REALLY hate that (and it seems that RPG companies loves it... it happened in BG2, and again in MotB). The problem really comes when you have a lot of items (say, using the same character from the original campaign tutorial all the way to SoU) and there's not enough "space" to store them.
My best guess is that it's removed at the end of the starting cutscene, but since I can't find that conversation, I can't find the script.