I'm not 100% certain, but I beleive that allowing people to take the host from their hands was a change made in the Vatican II council in the 1960's. I remember because my parents were taught to never touch it in Catholic school, but by the time I got there you had the option of taking it from your hands or having it placed on your tongue.
RE: dropping a host: this is false. I was an altar boy in a Catholic church, and any hosts not used were put into a metal box, I cant recall the exact name, but it only contained blessed hosts and wine. Any remnants of host, such as crumbs, or small amounts of blessed wine, were our job to dispose of. There was a special sink in the back that we would run and then wash the items in. The priests said it was special because it emptied directly onto the soil, putting the blessed items back into the Earth, instead of having them mix with sewage as they would in a normal drain.