Hmm..that's not what we're seeing, though it seems I used a different vendor.
Can you let us know if this is specific to a certain vendor, or if all of them show this? I know you both posted different ones, but try heading to another vendor just to see if it's a global issue.
Also, fun classic question, but if you're using any add ons, try disabling them and reloading your UI.
EDIT: As a side note, I did just run a repair on the client so that may help as well. Also, yes, I only have 100 bag slots. .
After running a repair I tested at several banks, Daggerfall, CH, Davons Watch, and Riften, all with the same results, I must point out that your screenshot shows a bag merchant, which I do not have any problem with.
I was brave and went for the bank upgrade, I got the 10 items as it should, so it's just a display issue.
Derp. My bad. Bags are working folks, nobody panic, I checked it!
Same thing is happening for me with the bank, so we'll go ahead and forward all of this feedback to our devs. No need for the additional clarifying information above. Thanks for the information!