That's odd, I equip mine all the time. It does not act as a stringed
instrument though. You can equip it with a weapon which really makes some
older bards who don't know the secret jump. Nothing like having a 40th
level bard begging you to tell how you managed to have an instrument and a
weapon equipped at once and where you got this lute they never heard of.

Kitasi

I tried this recently, but Lisera (from Cassius at the Bard Guild in Qeynos)
is not equippable.
-KS