So I ended up on the third level of the Draracle caves without the cup or dagger. Is there a way to backtrack out, or am I going to have to restart my game?

You can backtrack. Use your map often.

I ended up restarting. I dunno if it's a bug or not, but I couldn't get back higher than level 2. Couldn't find either item anywhere.

I'm softlocked as well in the draracle caves. I didn't find the silver goblet, and i can't even go back up to check the chest it's supposed to be in, because the path up to level 2 has closed. What's weird is that i apparently have opened the chest in question but never found the goblet (i know i wouldn't have left without emptying the chest, nor would i have left it anywere on the ground).
But anyway, even if i did leave it there, as you can't backtrack in that area, i suppose i'm softlocked. Unless there's a super secret way to move through the wall that appeared, a secret so well kept that no walkthrough actually talks about it.
It's not too far in the game but i doubt i'll start over before long. Too bad, i was excited to play it again after so many years...
I guess i just wanted to put something on the internet about this issue because i've scoured forums in search for a solution and people seem to believe you can backtrack, or look surprised when they read items might not show up in the chests th'ey're supposed to be in, so i'm just here to say "no you can't, yes it happens".

In my recent playthrough I managed to avoid this somehow. But I guess it always pays to reference a walkthrough once in a while before leaving certain areas, to make sure you haven't forgot anything.