Sometimes if you steal the lockpicks first and then get the quest to do so they get put back in the desk/table. Perhaps stealing the dagger did something similar?
Did you first talk to Finnigan around when you entered the castle?
In the unpatched game, using the Lockpick skill with the magic lockpicks in your inventory will break them. Installing the
patch after this will put them back in the city watch building, and they will no longer be breakable.
If dropped on the ground, they will disappear (which the patch will not fix). However, they can still be recovered;
Lost Items - guide and directory of inventory files - Ignore the first reference to Finnigan's magic lockpicks that directs you to a different topic; as of the 1.34 patch / 1.0034A game version, this is the best way to replace the lockpicks.
If the game is started after installing the patch, or in an already updated version of DD, then the lockpick is unbreakable and can safely be dropped on the ground. Also, you can return the lockpick to complete the quest, and then buy them back (in a game started in the unpatched version of DD, you can not buy them back, so IMNSHO it is better to keep them and leave the quest unsolved).
