Is it even possible to acquire a Sword of Ancestors?

According to Gothic Interactive map, the chest with the blueprints is around Pedar's place. The only chest I see there is the one in his house, and there aren't any blueprints there.

I am running with CP 1.74, Quest Pack, and Content Mod. I don't know why a mod would remove a valuable weapon, so I doubt that's the problem.

I finished the long chain of blacksmith quests, and finally got the smelt pure ore skill (though I have a save from before I bought it, in case I decide not to pursue forging a pure ore weapon)

Is it even possible to get this weapon?

The maps in Nordmar can be really tough because there are typically multiple areas that overlap in a horizontal plane that are located in different vertical planes (different elevations), Take a look at the Gothic 3 walkthrough you can download here, page 166, paragraph no. 1150.

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The blueprint is not in any one specific chest. Rather, you have to open enough of the "weapons chests" in order to get the blueprint. According to this:

http://www.rpgwatch.com/forums/showthread.php?t=2682

You need to open 39 weapons chests and in number 39, you will obtain the blueprint for Sword of the Ancestors.

That system was always a bit shabby in my opinion. I know it encourages exploration, but unfortunately it also means you'll be able to squash anything in the game by the time you can make proper use of the Nordmar blacksmithing stuff.

The loot system is one of the weakest aspects of Gothic 3 imo. I disliked how they decided to randomize most items rather than hand placing everything like in Gothic 1-2.

This isnt "fixed" in community patches? Ie I need to go lockpicking to get any decent sword?

No. If I recall correctly, the good loot is mostly in ancient chests which do not require lockpicking.

The other chests (non-ancient ones) often require lockpicking, but only contain random loot.