Q: If cards are dropped on a Precipice space in the Highlands as a result of a Character Encounter, are they discarded at the end of the Turn?
I claimed that the answer is no, since any effects on the space do apply only if space is encountered. In my last game Priest Toadified Gypsy and got Toadified as well because of Hydra Spell. A lot of stuff was left on the Precipice space. Gypsy was killed by two deadly blows by the Toad-Priest, then the Priest was able to get back on the space and take everything. Someone argued that everything should have been discarded, but I said that cards were dropped in a Character encounter. I hope I was correct.
Of course I lost that game even if my Priest was very close to victory, but he could not compete with the Sprite replacement of Gypsy. It was amazing enough that the Priest did pretty well in a game with much more solid Characters.