Is Geralt stripped of his weapon after fighting Letho in the Elven ruins near Flotsam?

Geralt loses his (steel) sword in the cutscene at the end of the fight. It does not automatically go to your inventory, but you should be able to find it on the floor. I'm not sure why you're not seeing it there. Perhaps you have to pick it up right after the fight?

Edit: I just played through that part again and it seems that the sword on the ground is not highlighted by the medallion. You'll have to look for it yourself.