Elven tanto not working?

[urthdigger]

I found an elven tanto in a shop, and seeing as I'm a mere 2nd level thief, I thought it'd be a good idea to pick it up. However, there's a small problem: When I try to use it, I attack with hand-to-hand. I double checked that I have it equipped, and it does make an unsheathing sound when I ready it, unlike normal hand-to-hand... but for some reason I'm still punching and kicking. Is this just a graphical glitch, or might there be some reason why I cannot use it?