I got cursed panties from the Warlock and assumed they would work like a chastity cage but that doesn't seem so.
is that a bug or did I misunderstand what they are designed for?
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If I recall they do not function as a chastity cage instead increasing your anal lover stat. Basic chastity cage given by/purchased from strange merchant will do the trick if that's what you're looking for. Other cursed items also work cage of power you can buy from witch at her cottage is I would say best choice or armour of anal torment from the far outpost, that last one is pretty hardcore though coz only thing you'll be able to do in fights with it equipped is stick your butt out.