I'm not in David Steel's head but from what I've read, he heard unsubstantiated rumours and had a gut feeling about Cyril Smith but surrounded by so many who believed Smith was God's gift, thought there was a fair chance he was wrong. There are always so many rumours doing the rounds who knows what to believe plus we are all urged to not listen to gossip. I always ignore gossip (admittedly things I hear are not in the child abuse category), maybe sometimes I shouldn't but to me people are innocent until proven guilty. Let's face it, much gossip is just nastiness. We see plenty of that in the press such as the 'HateMail'.
David Steel probably now thinks he should have trusted his instincts but that's hindsight.
I didn't know about Thatcher and Saville but no doubt she was the same. There were apparently rumours about him circulating for years but lots of people dismissed them, thought he was a target because he was eccentric. We live and learn.