he can't just take your identification, period. if you are released then so is your property. i'm guessing it was a mistake or just him being a dick (perhaps if we had the whole story we could determine which).
you have a legal obligation to identify yourself in certain situations. so if you go to vote/buy beer/withdraw money you are going to get stonewalled. you paid for a piece of plastic that serves 2 functions; motorist privileges and identification. he had no right to the licence. if it was simply a state id we wouldn't even be having this discussion.
he should have given you a ticket with his badge number on it. if not the police station can find out who it was. if it were me i would pursue this to the fullest extent of the law. unless, of course, there is some tidbit you left out...