After a bound item expires the last equipped item of that type is not automatically re-equipped
In vanilla Morrowind when a "Bound weapon" effect expires, the last weapon equipped before the effect started is automatically re-equipped. This behavior is also documented in the in-game description of "Bound weapon" effect.
In OpenMW v0.34 this is not the case. When the "Bound weapon" effect wears off PC switches to "Unarmed" instead of the last used weapon.