Maybe I misunderstand, but I was aware of pausing the game and I did do that too when equipping the red armor.
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Ah yes, during combat I don't think I could equip anything ever. I figured it was intentional. But for this particular red armor, it definitely happened outside of combat too. In two playthroughs, for that same red armor. It is a later level, I don't recall which. It simply could not be selected (it never gave the drag indicator).