As far as I can tell, *containment* isn't broken. However, it is complicated.
You are told that the article of clothing you are wearing is in your location because there is a link from your location to you to the clothing. That is not a bug because clothing you are wearing is certainly part of the graph and it is certainly reachable by traversing a link to you and then traversing a link to it.
Nevertheless, the resulting behavior of "look" with respect to worn things is not the desired behavior.
As far as I can tell, *containment* isn't broken. However, it is complicated.
You are told that the article of clothing you are wearing is in your location because there is a link from your location to you to the clothing. That is not a bug because clothing you are wearing is certainly part of the graph and it is certainly reachable by traversing a link to you and then traversing a link to it.
Nevertheless, the resulting behavior of "look" with respect to worn things is not the desired behavior.