All those telling you to keep the Stiletto are wrong. Sorry guys, but you dropped the ball this time.
First thing first, both daggers are bad, but if you need to keep 1 then keep the Sidestep Dagger.
Why?
As far as I know, and pointed out by Minuos, the 20% damage if not being hit for 5 seconds doesn't work. Well, it "works" as long as you don't get hit at all. If you do get hit in area 1, don't go thinking it will work after 5 seconds not being hit. You got hit, it's gone for the match. That was a big problem from day 1, never seen anything in the patch notes about it, so I wouldn't get my hopes up for this to have been fixed...
But for argument's sake, let's just say the 20% was working as intended. How much damage represents 20% of 48 damage (from the Stiletto)? 9.6 damage. How much damage does the Sidestep Dagger has over the Stiletto? 10 damage (58 - 48). So what is better, 9.6 damage if not being hit for 5 seconds or 10 damage no matter what? Obviously, the Sidestep Dagger is better. Of course, the calculations are a lot more complicated than that, but at the end of the day, no matter the multipliers the 10 damage "anytime" will out do the 9.6 damage "if you're lucky".
Also, "DPS is all that matters" is actually utterly false in this game. Unless you don't use any abilities at all, all that matters is weapons' base damage. Your abilities are all based on your weapon's base damage, the best your auto-attack can do is 100% weapon damage while most abilities are >100% weapon's damage. The rule of thumb is the higher the base damage the better. When you get into very high numbers for the base damage, 1 to 10 damage difference will not matter, but at a lower scale, it makes one hell of a difference. A 10 damage difference between 40 and 50 is 20% less damage for the lower base damage weapon. A 10 damage difference between 140 and 150 is only 7%. The higher the base damage, the lesser the difference in final damage.
Although, this rule should be nuanced too. Some weapon abilities will trump anything. For example, because most Rogue's abilities don't use the second hand dagger to calculate damage then it's better to have something that has an amazing ability on it. Another example would be the Bloody Bargain dagger where arguably gives you more return than 100% Critical Damage from the Hakkon Dagger. I ran my Assassin and Alchemist without any Hakkon daggers, the Bloody Bargain speed + the ??? +548% damage flanking dagger (that I don't remember the name) were too good to pass up. A third example is the Hakkon 2H sword that is lower base damage than some mauls. The 100% Critical Damage + the Horn of Valor abilities makes the Hakkon 2H sword much better in almost any case. But as you can see, most of the examples are about end-game weapons so before you get there you should stick to the rule of thumb that base damage is all that matters.