Hmm... It's an interesting mechanic, I do think!
I have a few thoughts:
First, I do like the variety that it can produce, and the manual feel of it!
It is perhaps a pity that the system doesn't support some of the more unusual styles of blade--or indeed, blades other than swords and daggers--but what it does provide is pretty neat, I do think.
That said, it does call for quite an investment of time and effort on the part of the player. And not only that, it calls for the player to spend a significant amount of time away from the rest of the game.
Thus, if I were engaging in this as part of a larger game, I think that I'd want the results to be rather better than anything that I might acquire by looting.
On a similar note, as it stands the mechanic does feel like an awful lot of clicking. For which Two ideas occur to me:
* First, that the effect of a single strike be exaggerated, thus requiring fewer clicks.
* and second, that striking the blade be done simply by holding down the mouse-button, ending when the button is released, thus reducing the number of individual presses involved.
The former of those--increasing the impact of each strike--might also aid in conveying the effect (if any?) of heating the blade.
All that said, I feel like this could be pretty cool in the right game! ^_^