I get it now, you cycle through the heros you have stationed in town and you cycle through each person (in town) to equip them using the items while selecting them. - Jeremy Sr.

Items are a bit iffy and unfinished(I hope ) at this point , so we will see some changes there before release. If you haven't noticed there is a button near "build building" in the city if you have someone in the city that lets you enter a shop and by every item you've researched.

I think that at this point in the beta that only the sovereign and recruited heroes gain experience.  Is it your sovereign that is not gaining experience?

To see your sovereign's experience before and after battle, hover your mouse pointer over your sovereign's level:

If you haven't seen it already, there might be some useful information for you in the Elemental for Dummies thread.