Can I use Dowsing Machine, discarding something + 1 Item card to get that 1 Item card back into my hand?
No, you cannot return cards to your hand that you used to pay this card's cost.
Source: Plasma Storm FAQ (2013-02-07), TPCi Rules Team (2013-02-07)

Relevant cards

Note: All applicable cards may not be listed below.
BW8_128