1. Some NPCs have a minimum pickpocket skill level requirement, especially important quest NPCs. You can steal quest items that let you bypass difficult combat.

2. I don't know, but at lvl 14 my dagger user can do around 4000+ dmg per turn with backstabs, I haven't played a melee char yet, but right now on hard difficulty most bosses die in one or two turns as soon as I setup my rogue properly. I mostly just use wizard to debuff and CC

3. It's nice for a backup for rogues, in situations when you can't get close.