i watched JL's video http://www.youtube.com/watch?v=dBJLXGiBh8A&feature=plcp showing the new item elevators that are possible now that items travel upward when they are trapped in transparent blocks, and decided to try and attach a small one of these item elevators to a compact animal breeding unit.
For me, the behavior of the items is a lot more random than in the video. Rather then travelling straight up they would always fly off to the side, and fall out of the machine. I added more glass around the edges to try and fix this, and the wool got stuck in the glass by the pressure plate (even though that bug is supposed to be fixed).
i then broke the glass and was not able to pick up the items. I backed up for a screenshot. Then I tried to pick them up again, and the entire stack of wool disappeared completely. (i checked my survival inventory, and it was empty)
replicating this may be difficult, as it may rely on this particular design, as well as the position of the wool as it enters the machine
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In his video the piston pushing items up is triggered before the item is completely on the pressure plate. Is it possible your version simply does not trigger fast enough?

the piston to push the items up has no delay, the only way to push the items up faster would be to slow the items down. but regardless of whether or not the machine works, items did get stuck in a transparent block, and their behavior was quite unusual. Ive been playing around with the machine and notice that if there is a small spike of lag as an item is moving up through my machine, it will appear to continue moving up, but when the game updates the items sort of teleport off in a random direction. I am very curious if this is reproducible for other people. So i encourage you to try and use the item elevator while a lag machine is turned on (a row of clocked pistons pushing glowstone should do the trick)

oh, just upgraded to 1.4.4pre, and the bug where items cannot be picked up seems to be a lot more common