I have just been on to double check and it now seems i can change anything apart from "drop item" which only still works with the default of "Z", previously nothing could be changed. I would like to change drop item to one of my side mouse buttons. The bind does also not work with a normal keyboard ...

Changing any function to a new key will result in that function not working at all. From what i can tell, this is any key, any keybind. Only the default key will activate that function eg. Z to drop items. I have no mods, only Space Age DLC, it also happens to my friend when either me or him host ...