Actually, the problem is that the default quest (the template, not proposed1st.qst etc) has the wrong data for the sword items. Lv1 and 2 swords have 0 and 0 set as the sword beam hearts and damage, Lv3 has 100% hearts and 4 damage, and Lv4 has 100% hearts and 8 damage.
Edit: Also, hitting Default in the item editor gives the correct values of 100%/100% for all swords.
Why are the default quest's swords constantly getting reset to these bogus values? It's at least the third time I've fixed this bug, and I'm starting to wonder if something is screwy in the quest loader...
Well, you know what they say... "Third time's a charm"
Of course, I wonder if other items are being corrupted like that as well... I'm going to go through them, and see.
Oh, while I'm here (since I don't know if this counts as a separate bug), the designated custom items' names aren't being shown as such. They default to z???, although they show up properly if you hit default.