Regarding the sword:
Usually in D&D the itemization is exactly like this, I think that Larian did an exceptional job at reproducing the itemization of a TTRPG campaign in this regard as well.
Regarding inadequate difficulty:
D:OS2 had a similar thing going. Act 1 was hard, the moment you finished the ship battle the game was practically ultra easy mode even on tactician difficulty, because it was not properly scaled around the toolkit you get with the mirror and, to a much lesser extent, the ability to get mercs as one trick ponys.
And in my first playthrough of D:OS2 I STILL failed in act 2 and act 3 multiple times - because I didn't learn the toolkit well enough, second run was then ultra easy.
Trick with Larian games is to reframe what it means to play a game. You're not thrown unto railroad tracks but into a sandbox with a lot of amazing toys. "Cheesing" is the normal way to play them, which is something I actually really enjoy, because even back in the late 80s (when I started gaming) thats what we always tried, but it was not that games back in the day were structured around it.
