Since melee rogues will just get detected trying to get close enough for that initial hit, even if it did work they'd be s/o stuck in the middle of all the enemies anyway (and wouldn't be that effective considering how armor works now). So far it feels like the only relevant uses for sneaking are stealing or light scouting. Even then, I haven't had to invest any points into sneak to successfully steal anything on my MC yet.
It's worth mentioning that the Cloak & Dagger skill from Scoundrel allows you to self-teleport and remain hidden/invisible. So you could use that to get behind an enemy, or use it to escape and go back to sneaking.
At very least I think a combination of your suggestion in having the ability to remove stolen flags and some kind of time frame before everyone is alerted to do so would be a simple solution to help *alleviate* the issue (something similar to murders would be cool to).
Some sort of fence or launderer for stolen items would be neat. Or possibly, the ability to extract the "magic" in an item and transfer it to a new one with crafting. For instance, you steal a ring with +1 strength, and then transfer that bonus to a new ring, destroying the original in the process and effectively removing the "stolen" tag.
