they drop, they can't be DE'd, you can loot them but you can't use them. You still get an extra badge. I actually sold loot off Malganis last night, I cleared up to him with 2 mins left and just ported my mage to dalaran, spammed in trade Malganis loot, and got a buyer in a few minutes. I charged 50g for the right to enter my instance and 400g if the buyer wanted the epic item off Malganis (fortunately the tank shield dropped which is exactly what he wanted).

I might do this for other instances too, just sell loot off final bosses, almost all of them are 4 mannable. Could do bronze drake, but I am always worried that something will go wrong and I wont make the timer and I will look stupid (lol).

I only run CoT now when its the daily, and rarely try to make the timer anymore (have had 5 drakes for a few weeks now), its a lot more fun just screwing around and exploring the little buildings while the timer counts down (lol). I've also 4 manned it twice now with enough time to kill the drake, so you can definitely do that for alts/friends.