It's easy to underestimate the dagger rogue in this game but after 2 playthroughs I'm quite happy with them except for the issue with backstab positioning.
When it comes to damage output I only had a problem due to the lack of decent level-scaled daggers I found in my playthroughs. Then you get a good one and boom - crazy assassin. Just have to invest in crafting/blacksmithing.
If I was to change anything however, I would make the backstab negate armor.
