So what's to be done? +Peter V. Dell'Orto has some good suggestions for template reform, but I don't think they go far enough. However, before I show you mine, I feel it needs a little justification.
One of the methods of accomodating the thief in the OSR (detailed here on pg. 44 - that's a PDF link) is to make it clear that anyone can try to do normal "thiefish" things, but the thief is so good he can do abnormally "thiefish" things. To quote, specifically from the first source:
When I allow Thieves, their class skills are treated as extraordinary capabilities. That is, anyone can hide, but a Thief can hide in shadows. Anyone can move quietly, but a Thief can move silently, without even making a sound. Anyone can climb, but a Thief can climb sheer walls. Et cetera. -Philotomy Jurament
Now, I realize claiming that this is the proper interpretation of a D&D thief is somewhat controversial. So instead I'm taking the dodge of borrowing this interpretation from Swords & Wizardry, a retroclone that, if you don't know about, you simply aren't paying attention to the OSR. (If you aren't, that's fine; not everyone's into it. Though I have to wonder if you came here from Peter's blog.) In Swords & Wizardry, this interpretation of the Thief is explicit.
Without further ado, how to turn the DF 1 Thief template into something more closely resembling the class abilities as explained above:
Drop Perfect Balance as a required advantage. Instead, put it in the list of discretionary advantages, and increase that point limit from 30 to 50 points.
In the discretionary advantages, include these:
- Chameleon (Shadows or other areas of at least -3 vision penalty and that are large enough to cover you only, -60%) [2/level, up to 10 levels]
- Clinging (Vertical surfaces only, -50%) 
- Detect (Traps, Occasional) (Precise, +100%, Short Range, -10%) 
- Discriminatory Hearing 
- Silence [5/level, up to 10 levels]
Drop Filch, Shadowing, and Smuggling entirely.
Drop Urban Survival to 1 point and make it a background skill, optional
Put another point into Escape and another two into Lockpicking.
EquipmentAll "Thieves'" whatever - Thieves' mail, etc - should allow the use of the Silence and Chameleon standing-still bonus while moving if it covers most of the body and isn't obviated by some other equipment - for example, a thief trying to sneak with soda cans tied to his ankles is going to have a hard time even with Thieves' Boots - but he'd find it easier to get over a nightingaled floor.
Really, the above could use a little more polishing (like removing some dross from the optional advantages - should anyone really be taking Catfall at this point?), but I think this is a good basis for letting thieves reclaim some of their niche. For one, they're much better to send ahead in a dungeon than a Scout. Your thief could easily have effective Stealth 34 while moving with the right advantages - or higher than that, with the right (mundane) equipment. However, he doesn't steal the Scout's schtick, which is both putting lots of arrows in targets and being sneaky out-doors, where the Thief's limitations are apparent, since there aren't a lot of dimly-lit corridors outside.