Given that in most games you loot everything under the Sun and then some without any repercussions, I don't think this is an issue.
I would agree, if it wasn't for how valuable some of the stuff is, relative to the risk. I can steal a few paintings from a simple house and exchange for a magical sword that is a massive upgrade to me. In "most games", if you want to get such a big upgrade, it's at usually the end of dungeon, after killing a boss, after finishing a big quest, or as a reward to something of similar difficulty.
I find this to be clever system (using one character as a distraction), but I don't think it should work 100% of the time.
I think it should do something like check how good your distraction is (how much your character holds the NPC attention), and how good your sneak is.
If your "sneak roll" is lower than your "distraction roll", the NPC should interrupt dialogue and turn around, discovering your theft attempt.