Since the player has the option of "catching" the returning weapon or not, it seems to imply that the weapon flies through the air and returns to you, as opposed to just teleporting back to your hand. Then again, it doesn't explicitly rule out a teleporting back to your hand weapon either. I would think either way would be fine and would just be up to the DM to pick for flavor.
Reading through the rules, yes, blinding barrage would not benefit from a single magic dagger, as the weapon returns "after a ranged attack with the weapon is resolved", and that yes, you need one dagger per target. It would be neat to describe the dagger sailing through the air and blinding everyone though, so if it were up to me, I would houserule it. If anything, just for the awesomeness factor!
There is a snag with this interpretation regarding Close Attack rules on pg 271 in PHB. These rules state that if, for example, a Rogue wants to use Blinding Barrage, he must have 1 piece of ammunition or 1 thrown weapon per target in it's area of effect. So he can't attack every target with a single magical dagger.
Making it a scabbard of infinite magic throwing daggers, which disappear after doing damage, changes that. It is a bit of a nit-picky concern, but this is the rules forum.
I don't have a link, and it may not mean much, but a CustServ ruled that magic throwing weapons hit all targets before returning. I believe the quote was "Yeah, magic throwing weapons are just that awesome".
Again, no link, so take it at face value.
It's also in the 4e Player's Handbook FAQ (which is surprisingly difficult to locate).
It's also in the 4e Player's Handbook FAQ (which is surprisingly difficult to locate). Here's the relevant text:
14. I am using a magical thrown weapon as part of an area of effect power. If I am attacking multiple enemies within that area, do I need multiple weapons, or will one suffice?
One is enough in this case. Magical thrown weapons return to you after each attack, so you’ll be able to use it against each enemy as part of using your power.
Of course, this doesn't actually agree with the text for magic weapons in the PHB.
As written, a magic thrown weapon returns after a ranged attack. A close attack or an area attack is not a ranged attack, and is not covered by the returning clause...
Even if we take the FAQ answer as overriding the PHB text, it has further implications. Consider a rogue with a magic dagger and the Blinding Barrage power. Let's say he's under a Divine Challenge from a paladin who is some distance away.
The rogue uses Blinding Barrage - there are four enemies (not including the paladin) in the blast. His dagger hits the first - he has made an attack that does not include the paladin, he takes Divine Challenge damage, he falls unconscious, and he is unable to make his attacks on the other three enemies.
Alternatively, if we forget the paladin, and assume that one of the enemies has a "If I am attacked" Readied action... the rogue attacks the first, his dagger returns; he attacks the second, his dagger returns; he attacks the third, triggerring the readied action, and as an immediate reaction the third opponent makes an attack that knocks the rogue unconscious. The fourth opponent is not attacked. However, had the rogue elected to roll his attacks in a different order, he might have engaged all four, or only one.
The imposed-sequential nature of the FAQ answer seems at odds with the concept of a Close Blast, which otherwise would appear to be intended to resolve the attack against all opponents in the blast simultaneously - the Divine Challenge or Readied Attack would deal its damage after Blinding Barrage is resolved, not after a particular attack roll within the Blinding Barrage 'set' is resolved.
-Hyp.