Are items discarded on use?
Items are not discarded after use.

I've found a video in which the creator of the game explains the rules. Items are mentioned at 4:30. He says:


  Magical Items can be played at any time during your turn, you keep them and hold on to them, but you can only hold as many as your backpack can hold.


He then describes the backpack-property of the character he chose, Medlissa.