I proved last night in magincia that this works only 50% of the time. I also found a faerie fire bow on an arcance demon. Dont think they spawn those!

To prove it, I died and got looted by an arcane demon. Another player watched it loot me, killed it, got my bandages, tehn gave em back. Instanced corpse? plooie.

About 15 minutes later, I died on accident and saw a daemon loot my corpse. After res (4 minutes return), i watched other players loot the daemn corpses. Then i went and looted my killer, and voila, my bandages! (they have this THING for bangages).