I've recently fully upgraded the Dawnstar Sanctuary, and I was hoping to pick up the worn shrouded armor (the unenchanted set) that I read on UESP exists in there. To my surprise I tried to pick up the Cowl/Gloves/Boots in the master bedroom and they disappear, nowhere to be seen in my inventory or anywhere. The biggest joke was I tried looking for the Chest piece and the spot it's listed as spawning at had no sign of a chest piece.

Pretty much a huge let down for my assassin character as I was relying on getting the set unenchanted for RP purposes. Anybody have any ideas what's going on? Oh, and I play on 360.

The enitre worn shrouded armor set spawns on the book shelf next to a desk just off from the training room. And you could have got it when you first entered the sanctuary.

Unless they changed it recently, it also can't be upgraded at a bench.

I got it during my first visit to the Dawnstar Sanctuary during the mission where you either kill Cicero or let him live. Like Lord Vukodlak said, it's resting comfortably on the bookshelf just before you enter the training room, just to the right of the table that has a Sneak skill book and an Archery skill book.

I never bothered to wait and see if the Worn Shrouded Armor spawned/was-still-around after completing the whole Dark Brotherhood quest line, I have always just grabbed it during my first trip through it.

On a side note, after the Dark Brotherhood quests are done and you've completely renovated the Sanctuary, I really wish they had kept access to the crypts down there. Not only would it feel more like you are carrying on a millenia old tradition (with a bunch of Assassins that came before buried not too far away), but the ambiance of the place was very morbid, and gothic in a way that only the Dark Brotherhood can pull off.

If nothing else, give another small set of quests where you sanctify the crypts, and get it prepared properly (like being Blessed by Sithis) to be the Night Mother's new, permanent Crypt.

That would've been sweet.