I never paid attention to the damage on daggers, but AFAIK even with Assassin's Kiss maxed, you can get better damage on a decent one handed sword. That implies the dagger you found should be near the upper range of damage.
I'm pretty sure the game does take weapon length into account. I used one handed short swords and a two handed bas.tard sword, and I never noticed any hits or misses that were inconsistent with the character animations.
I tried reloading a few times for both the nobleman's sword and amulet, but didn't try with the dagger.
