During the confused fighting in Retaking the Fringe my character, Anda, had Dawnfang knocked out of her hand. When the fighting was over she could not find it on the ground. Guess why. Shelden had picked it up. As yet Anda has found no way to get it back. Shelden is essential (and anyway Anda would not kill him) and the sword cannot be pickpocketed while Shelden is wearing it. Our only hope is that perhaps, when the Fringe returns to normal and Shelden can get into his house, the sword can be regained while he is asleep. Otherwise... oh well, Anda is primarily an archer....

You can use disintegrate weapon spells to break it, then he'll drop it.

I just have to say that that whole thing seems so perfectly appropriate. As far as I can think right off, out of all the characters in the entire game, there's nobody for whom it would be more in character to blithely pick up and keep such a valuable weapon than Shelden. After all, he is the best.

gpstr: You are completely correct! Shelden would think that Dawnfang would be no more than he deserves.

But the good news is that after Anda became the Madgod(dess), she went back to Passwall--where things were back to normal--and upon entering Shelden's house discovered that he was no longer wearing Dawnfang. She easily pickpocketed it from him. Ha! (However, since Shelden did fight bravely earlier, she will bring him a nice sword when she returns to the village. Maybe he'll pick it up.)

Maybe you can convince Shelden that he's too good for that sword

Actually I'm not quite sure how to get it back, except as mentioned above, disintegrating it.