1: Are you sure the minigame does not work? It should be like:
1: heat up blade at oven
2; place blade on anvil
3: Press X to start hammering
4: Press x when the red line is on the green bar
The minigame is very small, and over the players head.
2: The swords you are providing may be *dulled*. It's a little hard to tell, but if you turn up your brightness, dulled swords have some rust on them. Any sword made from the mould are dulled and need to be grinded.