Solve all Black Forest quests first - then go to the sword. The ghost will still kill, but you've moved on - a decision you have to make for yourself.
Kiya
Other swords: Blade of Chaos (East of Dwarven Village/Rivertown), Singing Blade (gave you the link, right? <img src="/ubbthreads/images/graemlins/winkwink.gif" alt="" />), Nobleman's sword (after the sacrifice of 3 holy items).
