The hit detection for the Sword really took a nose dive in the latest beta. It doesn't affect the player while they are moving about normally, but if they're jumping in a side-scrolling stage, the sword just doesn't connect to enemies or slash combos at all. Go check out the Zodiac quest posted in ZDiscussion to see what I mean. Enabling slashing improves the hit detection a little bit, but it's still really, really bad.
Sword Hit Detection
This isn't really the fault of the latest beta - I've noticed it for awhile now.
It's been there since 254.
Update
C-Dawg wrote:"Sword Hit Detection" - Still a bug as of 550, and confirmed.
I fixed this bug several builds ago - see http://www.armageddongames.net/forums//thread/98632/. If there are still problems I'm going to need more details, as it's now working to my satisfaction.