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Patch 2.0.1 introduced a lot of significant changes to the loot system in the game. One of the significant ones was the revamp to the Puzzle Ring, which now has a new effect:

Summon a treasure goblin who picks up normal-quality items for you. After picking up 12–16 items, he drops a rare item with a chance for a legendary.

  • What is the cooldown on the goblin item drop?

  • Does the effect stack if you have one on your character and another on your follower (i.e. two goblins)?

  • Is the drop chance for the rare/legendary affected by increased Magic Find? If so, approximately how much?

  • Is there a cap on them max item level of the dropped item? (While < lvl 60, at lvl 60, and when the level cap is raised in the expansion.)

  • Does the item counter reset when you leave the game, change acts, or die?

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I confirm the following after after some testing:

  • The ring does not work if equipped by your follower
  • The goblin is summoned when equipping the ring and follows you around as long as the ring stays equipped, unequipping it will reset the item counter
  • Dying will reset the item pickup counter, which means you must start over with collecting normal-quality items after you die
  • Exiting a game resets the counter
  • Exiting an Act also resets the counter
  • The goblin will not pick up player dropped normal-quality items nor will it pick up normal quality crafting mats
  • The goblin will pick up low quality item as well
  • It seems that when you go from zone to zone, the game unequips and re-equips your items

Big areas to farm the normal/low-quality items:

  • The Cursed Hold (Act 1)
  • Halls of Agony (Act 1)
  • Battlefields of Eternity (Act 5)

Legendary drop rate is currently unknown.

Patch 2.0.5 notes the following changes:

  • Legendary drop chance doubled
  • Rare items dropped will now always have six affixes
  • The counter for picking up normal-quality items will now persist through death, act transitions, and un-equipping the item (Note: This still will not persist across game sessions)
  • The goblin will now play a sound when its counter reaches max and it drops an item
  • 3
    Can the Goblin drop torment only legendaries ? – WizLiz May 17 '14 at 15:25
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Even though I can not answer all of your questions since I did not get a puzzle ring twice yet, I can answer some of them.

  • There is no cooldown on the goblin. As soon as you equip the ring, the goblin appears next to you. As long as you stand shortly next to a normal quality item (in my experience: even a low quality item), the goblin will pick it up. At this point, it "disappears" (it does not "pick it up for you" as the description says, but rather takes it). After the goblin has picked up enough items, it drops the mentioned items.
  • In my experience, the level of the item always matches that of other loot drops (equivalent loot drop).
  • As far as i know, the drops of the treasure goblin work like any other loot drop. When determined which type of drop is going to happen, the magic find as well as other modifiers will be taken into account.

This answer is only based on my experience though, not on any type of datamining etc.

  • I meant if there was a cooldown on the item drop. – Krazer Mar 12 '14 at 15:24
  • Not as far as I am aware of it. But then again collecting that amount of white / gray items also requires quite some time for me, because since loot 2.0 the amount of that kind of items dropped significantly and most of them do no longer come from monster drops for me (and I suspect for most others as well), but from the various staches ("torture tools", "weapon rack", ...). – Bloodystomp Mar 14 '14 at 15:43
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As of patch 2.0.5. This patch changes a few things about the Puzzle Ring.

The goblins have been scouring Sanctuary for better loot to drop:

Legendary drop chance doubled
Rare items dropped will now always have six affixes

The counter for picking up normal-quality items will now persist through death, act transitions, and un-equipping the item

It still will not persist across game sessions

The goblin will now play a sound when its counter reaches max and it drops an item

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