Physics/Network Ownership behaviour suddenly changed

A change to physics and network ownership has broken a core mechanic of our game 99 Nights in the Forest. We haven’t updated the game today and the main ‘Sack’ tool is broken for all players.
We use a combination of client and server parenting to allow players to collect items. The usual flow is:

item gets ‘picked up’ by player
item parented to replicatedstorage locally, broadcast to server
server transfers network ownership to player, and then parents to replicatedstorage

item gets ‘dropped’ by player
player locally parents item back to workspace, moves to correct position, broadcasts to server
server parents to workspace, and re-attributes network ownership

When working correctly:
The item drops in front of the player and can be interacted with normally. The item position set by the client syncs to the server and all other players.

Now (broken):
The item teleports back to the original position where it was picked up by the player

First report of this issue was around 4:40PM PST. Currently affecting 1M+ players

A private message is associated with this bug report

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Experiencing a similar issue in Arcane Odyssey where parenting something from workspace → ReplicatedStorage → workspace can cause parts to not update their position properly. Also started occurring today.

Hi, thanks for the report
We rolled back the flag that caused the problem. The issue should be resolved by now

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