True Divine One;
No essential NPCs are killed by the ghost. If you don't have a save before taking the sword that you can reload (or if that was too long ago), there is a way to get specific NPCs back. It is a manual procedure, so I would probably just use it for the bow merchant and the elf by the well.
Reviving dead NPCsIf the NPCs for the elven village are all listed together in the character section of the data.000 file, it should be possible to replace all their character data at once from an appropriates save, and get them all back. Care would have to be taken not effect the elven council member (and possibly the quest status for the elf by the well).
Mykeytwo;
Banish will not work. The only way to get rid of the ghost for good is to place the sword back in the stone.
Sword from the Stone screenshot (56KB) - Fake Excalibur
If you want to keep the sword you can either cheat and duplicate it before putting it back, or wait until you have done all the quests in the Dark Forest before removing it.
To copy an item
quick save the game, then drag an item out of your inventory, but not somewhere there is a red X. Without dropping first, quick load the game, then release the mouse button when it starts to load. This will produce a copy of the item on the ground, with the original still in your inventory.
There is a much easier method for items which can be stacked;
Drag a stack out of (or into) your inventory (or container) and hold down the control key before dropping. This will bring up the split stack pane; type in a negative number and hit enter (the checkmark will be greyed out). This can also be done in the trade window.
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