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Did you check your Special Inventory (the inventory tab listed "Me")? Quest items and character bound items are frequently placed there instead of the main inventory.
Unfortunately, it probably is on purpose. If you did successfully take the name Ilyich, then some troll could easily take the identical looking IIyich and cause serious problems for you. I think, however, that double I should be the blocked configuration. Il- would seem much more common for names that were actually like names.