Seth's sword can be fairly good for early in the game, but there are lots of other swords available, so you are not missing anything if you pass on murdering the only person protecting the town while you are gone. <img src="/ubbthreads/images/graemlins/biggrin.gif" alt="" />
You can kill Seth using Poison Cloud (cast near, but not directly on him) so he does not turn hostile and attack. If you wait a few seconds after he is dead to save, you can bring him back to life (
Reviving dead NPCs). Testing the revive procedure, I killed and hex-resurrected Seth a few times, so he dropped multiple copies of Brightblade. A couple of these were relatively nice and could have come in handy when I first left Aleroth, but by the time I got close to finishing the escort quest I already had a comparable sword.