As the link below shows, you don't need to actually have any hands on an enemy while grappling.
http://www.d20srd.org/srd/combat/specialAttacks.htm
Grab. You make a melee touch attack to grab the target. If you fail to
hit the target, the grapple attempt fails. If you succeed, proceed to
Step 3.
As such, you can hold two light weapons and attack with either as you wish, or even theoretically a two handed great sword.
To answer your questions.
Yes, you can hold two light weapons. What you're carrying isn't affected by your grapple.
Can you sheathe a weapon? The rules don't cover that directly, but probably by RAI. As the rules below note, drawing and sheathing weapons are similar move actions.
http://www.d20srd.org/srd/combat/actionsInCombat.htm#moveActions
Drawing a weapon so that you can use it in combat, or putting it away
so that you have a free hand, requires a move action. This action also
applies to weapon-like objects carried in easy reach, such as wands.
If your weapon or weapon-like object is stored in a pack or otherwise
out of easy reach, treat this action as retrieving a stored item.
And from the first link on grapple rules, this notes you can draw a weapon to attack.
Draw a Light Weapon
You can draw a light weapon as a move action with a successful grapple
check.
So, if you have some special reason to want to sheath a light weapon you probably can. By RAW, it's not an allowed action for an average individual.
- You can draw as many light weapons as you have hands and move actions for including two, per the above rules, although you can only attack with one.
From the first link.
You can make an attack with an unarmed strike, natural weapon, or
light weapon against another character you are grappling. You take a
-4 penalty on such attacks.
You can’t attack with two weapons while grappling, even if both are
light weapons.
- As it implies, you can have two weapons, and attack with one of them. You can choose which one, as it says or, or you can attack with an unarmed strike or or a natural weapon.
It is of course important to remember the fiction. Some DMs may not allow you to enter a grapple with two weapons, if you have no hands to grab them, because they don't see it as realistic. But, by RAW it's fine.
If you want to make this easier, it may help to pick up an extra hand, a bite attack, or a tail so you can justify grappling them with that while you wield multiple daggers.
http://www.giantitp.com/forums/showthread.php?127463-3-X-Extra-attacks-natural-attacks-AoO&p=7066595#post7066595
This has a list of ways to get extra appendages.
