It sounds like one or more pieces of your equipment had an Elven Sight or Ranger Sight bonus, and removing them reduced your sight range close to or below zero (ie a problem with the sight range calculation at some point adding or removing the equipment). This is a rare bug that can sometimes happen if the passive levels you have learned and the equipment bonuses add up to about level 4 or more. Rare as it is, though, someone else had a similar problem a couple weeks ago:
Problem with sight (radius?).
You could kill the two guards who take your stuff using an area effect spell that does not need a target (such as Poison Cloud), so that they do not turn hostile and you do not loose any reputation (click near but not directly on them and they will take damage but not count it as an attack).
This will avoid the problem with the dwarven halls, but you will still be left with no sight range if you have to remove the equipment to upgrade or as part of the plot (after visiting the castle or for the optional bar fight).
There are a couple solutions to fix your sight range in the topic linked to above.
