The sword is the final weapon in Return to Dark Castle. It does not appear in any of the previous games.
The sword is has many advantages over most of the other weapons. The player has the ability to jump, climb stairs, and descend ladders while holding the sword. The sword kills any henchman in one hit, and like the maces can deflect many hurled objects and and smash petrified creatures.
Bryant wielding a sword.
The sword appears in Black Knight's Throne Room, and is the recommended weapon to use against the Black Knight himself. The player will drop the sword or whatever weapon he is holding if he manages to beat the Black Knight, though he will be able to go back to the armory and get it.
Though it is hard to see in the game, Henchmen can infact wield swords. Presumably they don't because Swords are seemingly more effective against Bryant and the Sword was meant to be reserved for the last level.