ok after reading your posts I'll take back what I said about drag drop being required.
Yes, transferring an item really isn't that bad. The player would just press the select button, move the directional arrow to select a target, and then press confirm. Three button clicks.
I really like what Overman suggested. If you can select (Mark) several items and then move them into a container like a large sack the UI will be very easy to use with a controller.
At the moment, I haven't designed the UI at all. In fact, it will be one of the last things I do. Until that time, the game is working as an ugly windows form application. Of course, I'm more focused on ensuring that the mechanics of the turn based combat system are working and designed well. The good news is that all the game objects are finally talking to each other. Once and a while I have sit back and refractor my classes and take into consideration how the UI and game animations will interact with my objects and methods. I think that if my windows forms application simulates how the UI will function I'll be fine.
So far I've designed the Inventory class to function as a tree and I think I'll keep it that way. My initial concept was to create a more realistic inventory system that made use of containers (sacks within larger sacks) complete with max object dimensions. Yes I know, with the path I'm going on I might need to include a "Grognard" gameplay option.
Anyway, the inventory system in my game is very complex. I even have OneHanded, TwoHanded, and OneOrTwoHanded items. In addition, the engine supports creatures with up to 6 equip-able hands (like the 6 armed troll I'm testing with). The troll bites, carries a shield in hand 1, a mace in hand 2, a sword in hand 3, no weapon in hand 4 (which opens up his claw attack), and a huge axe in hands 5 and 6.