I wouldn't call Volke's combat "bad", especially after the Stilettos start showing up in Ch.21.
His Strength has a fair chance to cap early on (thanks to its 55% growth and his 12 base Strength), his Skill is good, and his Speed is excellent. 15/1 Volke, not an unreasonable level before promotion, pulls about 17 AS, enough to double everything in Ch.20 but the horseback units, Shiharam, and the lone myrmidon (I chose Ch.20 because it's the first one after he promotes to an Assassin). He also averages 16-17 Strength, and enemies usually run around 11 Defense at that point in the game.
Indeed, Knives and Daggers are poor, but the Stiletto is effectively a personal Armorslayer (because, frankly, who else would use the knives well enough to make giving them to that character worthwhile?) that also works well in combat otherwise. And you get two free (Ch.21 chest, and when Bastian joins in Ch.25).
Lethality is a hit-and-miss skill, but it effectively multiplies his critical rate by 1.5x (since activation is [CRT]/2 %). Throw in his good Skill and the Stiletto (+10 CRT), and he's got a good chance to tear something to pieces between a critical hit and the possible OHKO, always a plus for a combat unit. Plus, who else would get one of the four Occult scrolls, besides maybe Ike and one of the Paladins?
My point is that Volke isn't "bad" at combat. He's not the best at it, but having one of the highest Speed stats of any unit and a solid offensive stat spread otherwise makes him a bit better than just thief utility.