Well, this happens with quest items when in dungeons or open world as well. If group loot is on me for the mob, and a quest item is on it, everyone can pick up the item. I don't recall this ever happening on retail. Then again, I started playing in 1.11. It could have been before this time that the quest items were added in the group loot round robin. Below is how it should work a quote from wowwiki. It also explains the items being FFA is the mechanic going haywire.
FYI round robin may be the best choice and then switch to group loot for bosses. Only issue with is is the trust with other group members in case a rare or epic boe drops on trash, as round robin would make it the looter's loot.
"2) In other quests which require collecting several items of a type (harpy feathers for example), the quest items will drop on some mobs and be looted in the normal way, except that if the current looter can't collect the items (not on quest, already has full set) then the quest loot is FFA for those members who can still pick up the quest items. Other items on the corpse are governed by the party loot setting.
On some quests the quest loot is always free-for-all and this may be the above mechanic gone haywire. Some quests where the party is collecting one item will use the named mob mechanism (1) (the Shaman Voodoo Charm from The Sleeping Druid quest, for example, where all party members can get the charm off the same shaman.)"
http://www.wowwiki.com/Loot