The maximum amount of any stack is 50k, so what you are seeing with your gold is normal.
When you trade, however, all the gold you have on you should show up in the trade window (though not necessarily grouped together). As a test, try drag and dropping the smallest stack out of your inventory, and hold the control key down before dropping, to bring up the split stack pane. Drop all but one of that stack, then trade, select an item to buy, and click on your balance icon. Does the full value get added in gold, or just one piece (ie your smallest stack)?
When trading, you can use any combination of equipment, loot, gems or gold to make up the value of what you are buying. I preferred using unwanted loot and equipment whenever possible when buying stuff, then jewelry or gems, and gold as a last resort (ie get rid of the highest weight to value ratio items first, and keep the lightest, most valuable stuff).
BTW, if you had talked to the pickpocket's wife before encountering him, you would have gotten a warning, allowing you to stop him from stealing from you (through an additional speech option).
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