I was trying to join my friend's server, which I do very often without any problem
We tried to update the server and our client to 1.8, but I kept getting a "Internal exception: io.netty.handler.timeout.readTimeoutexception" error, so we tried to switch the server back to 1.7.10 until I found a fix. But when we opened the server, ALL of our items (on us, inside chests, even in item frames) had dissipated. Armor on our horse was gone as well.
Afterwards, we tried to give ourselves some items in 1.7.10, log in in 1.8 then go back in 1.7.10 and indeed the items we gave ourselves were gone.
This is a pretty important issue that completely broke our server, so if there is no fix to it now its better to fix it quickly.
Didn't you backup your world before updating?
And going back to a previous version is asking for trouble, especially with so many internal changes that's been made between 1.7 and 1.8.