Updating with more info + reproduction steps:
This issue seems to be far more wide ranging than the original report, and is present regardless of the Loot mode (eg, Need before Greed, Free for All), and is in fact reproducible when not in a group.
Steps to reproduce:
1. Kill a mob
2. Open the loot window, if there are 3+ items of loot take the top one
3. Close the loot window, then reopen it
4. Attempt to loot the item at the top: "Item is already looted"
5. Attempt to loot the second item in the list: Success
The issue appears to be that for each mob each position in the loot window can only be looted once. Therefore once item at position 1 has been looted reopening the loot window reorders the items and it can't be looted again.
While solo this isn't really an issue - just loot from the bottom up
In a group this is a major issue with FFA loot, and more importantly with Quest Items which are largely un-lootable