I am at the end of Dragon's Eye. The problem that I am having is that my theif can not disarm the traps so I usually end losing at least one character right away. Is there something special that you are supposed to do to disable these traps.

No. IIRC they are all dissable (able . I dont know at what level skill you need to be, but my thieves always go for trap detection first, lockpick 2nd. I never pt any in pickpocket/stealth... at last until later.

Yeah it has to do with how many points you dedicate to the theifs find/detect traps ability. Next level use all his points toward it and you'll have a better chance at disarming them.

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