A convicted sex offender has been charged with two counts of first-degree kidnapping for allegedly taking captive two young siblings who had been missing for seven weeks.

Joseph Edward Duncan III (search), 42, appeared in a Coeur d'Alene, Idaho, court via video hook-up. He was not granted bail on the kidnapping charges, but bail was set for $2 million on a fugitive warrant for a prior criminal charge in Minnesota.

Wearing a yellow jumpsuit, Duncan was shackled and appeared unshaven as he looked intently at the judge during the televised hearing. He appeared to be crying and said little, other than to acknowledge that he understood the charges against him and asking if could consult his attorney, Lynn Nelson, a public defender.

The charges carry maximum sentences of life in prison or the death penalty. Duncan has been in jail since Saturday, when he and Shasta Groene (search), 8, were spotted at a Denny's. Shasta's brother Dylan, 9, is still missing and feared dead.

The two were reported missing after the bodies of their brother, mother and her boyfriend were found in their home. Shasta Groene told investigators Duncan, a stranger, was also their killer.

Sgt. Brad Maskell told reporters that according to the girl's account, Duncan bound the family in ligatures after entering the home. She and Dylan were carried out of the house and placed in the pickup Duncan was driving.

After switching vehicles, Duncan took the two children to a campsite in Montana, the first of what would be several such sites. The two were repeatedly molested, Shasta told investigators.

During a search for the still-missing Dylan on Monday, "possible" human remains were found at site in western Montana. The grim news cast a cloud over the joyful reunion of Shasta and her father, seven weeks after she and her brother disappeared and her mother and two men were found brutally murdered.

Kootenai County Sheriff Rocky Watson said the remains were being sent to the FBI crime lab in Quantico, Va., for DNA analysis, which was expected to take three days.

Watson declined to answer questions, but the fact that he called a press conference at the place where reporters were following the Groene story indicated officials believe the remains were related.

"Unfortunately we believe Dylan to be deceased," Sheriff's Capt. Ben Wolfinger said after Watson's announcement. Shasta told authorities her brother was dead after she was found.

But family members said until there was proof Dylan was dead, they would continue to hope he would be found alive like Shasta was.

"At this point we don't have a confirmation. Until we do have a confirmation, our family is holding out hope that Dylan is still out there and needs to be found," Wendy Price, an aunt, told FOX News.

Dylan and Shasta had been missing since May 16, when the bound and bludgeoned bodies of their mother, older brother and mother's boyfriend were found at their rural home near here. Shasta was spotted by employees and customers early Saturday morning eating breakfast with a man at a Denny's restaurant in Coeur d'Alene.

Duncan, from Fargo, N.D., is a violent sexual predator who has spent much of his adult life in prison.

The sheriff's office released a photograph showing a smiling Shasta hugging her father Steve at Kootenai Medical Center (search). Another photo showed her holding a doll. The photos do not show any apparent injuries from her nearly six weeks of captivity.

"She's a much happier little girl right now," Wolfinger said, adding she was listed in good condition.

Price told FOX: "She's doing well. I spoke to her briefly the night before last, and she sounded upbeat. She sounded like any normal 8-year-old child that was having a conversation with their aunt."

Officers have interviewed the girl a couple of times, but details of what happened to the children are agonizingly slow in coming. Duncan has refused to cooperate, officials said.

Major questions include: Was Duncan involved in the three initial slayings? Have the children been with him the whole time? And, if so, where have they been hiding?

"We've got a lot of questions left unanswered," Wolfinger said, and some 60 investigators from the local area, the Idaho State Patrol and the FBI are working the case.

Authorities believe Shasta may have tried to get patrons at a gas station and convenience store to recognize her, hours before she was found at the Denny's restaurant.

Security camera videotape showed Shasta and Duncan at the store Friday evening in Kellogg, about 40 road miles east of Coeur d'Alene.

Kootenai County Sheriff's Capt. Ben. Wolfinger said Tuesday that from his study of the videotape it appeared Shasta was "wanting to be recognized by the patrons there in the store."

"In the small takes I saw out of that surveillance video, she's walking around, stopping, looking right at the faces of the different patrons there," Wolfinger said on ABC's "Good Morning America."

Cameron Conoco owner Ted Beamis told The Associated Press that the girl's alleged abductor, Joseph Edward Duncan III, "acted like he didn't have a care in the world.

"He was walking around. You could see him kind of watching her. One time in the store she's wandering up and down the aisles, and he kind of loses track of her, and you can see him looking around in a panic."

Family members were angry that Duncan, a violent sex offender, was out on bond at the time Shasta and Dylan disappeared.

"I know that he was allowed out on a $15,000 bond on his third arrest after having been convicted and spending 14 years of a 20-year sentence for brutally molesting a young child where there was torture involved," Price told FOX News. "I believe he got out, and I believe he has just continued to work his way through our neighborhoods like 500,000-plus other sexual predators that are registered in this country are doing today."

Authorities have relied on information from Shasta, evidence from Duncan's stolen red Jeep Cherokee and some 100 new tips from the public in the search for the boy. The tips have poured in since photos of Duncan and the Jeep were released, and many are "vehicle-specific and Duncan-specific," Wolfinger said.

Watson said the remains were found at "one of the possible locations in western Montana," but did not elaborate about the site.

"Investigators continue to follow all of the other leads in this complex case," Watson said. "This case continues to be the No. 1 priority for all agencies involved."

Shasta has provided helpful information, but Wolfinger declined to say exactly what the girl was telling officers.

"It's a slow process with Shasta," he said. "We're taking that very slowly."

The children were declared missing when authorities arrived at their home May 16 and found the bodies of their mother, Brenda Groene, 40, brother Slade Groene, 13, and their mother's boyfriend, Mark McKenzie, 37.

Authorities believe Duncan and the children remained in the Northwest during the past seven weeks, but Wolfinger declined to say where. He also would not say if there was any evidence others were accompanying Duncan.

Steven Groene on Sunday night spoke publicly for the first time about being reunited with his daughter, and thanked the community for its support. He said his daughter was watching movies and had a vanilla shake and pancakes for breakfast.

"Shasta is doing very well and we all are very hopeful that Dylan will come home safely," he said.

Officials have not said why they believe the Groene family was targeted. Steve Groene said he had never heard of Duncan before Saturday. Authorities searched Duncan's Fargo apartment.

Duncan, who was raised in Tacoma, Wash., had spent more than a decade in prison for sexually assaulting a 14-year-old boy at gunpoint and was a fugitive at the time of his arrest for allegedly molesting a 6-year-old boy in Minnesota.

A registered high-risk sex offender, Duncan was released on $15,000 bail earlier this year after being charged with molesting the boy. Police in Fargo had been looking for Duncan since May, when he failed to check in with a probation agent.

The Associated Press contributed to this report.