[Suzerain of Sheol]

Well, keep in mind, most corporeal things are vulnerable to stabbity-stabbing their spirit, so the either/or thing doesn't really work. I wouldn't consider it overpowered, though. Now if he somehow got his hand's on one of the Sariel's swords that can not only do that but is a.) invisible, and b.) absorbs every form of energy in the electromagnetic spectrum (which psychic attacks fall under), *that* would be a little much. :P

And it depends if it's some high-tech cutting-edge piece or an antique. Like I said, pretty much any kind of conceivable weapon is available here for the right price. Or he could have found it raiding some fallen sanctuary or whatnot. Depends on how it works, too, if it's consecrated or psychoactive (you don't have to be a psychic to wield psychoactive weapons, doing so just turns it from "really nice magic sword" to "freaking lightsaber" while your channeling psi into it.)

Or maybe there's some alloy that's been discovered that has an astral presence and allows the weapon to affect incorporeal beings. (Milton uses Ether, Adamant, and Electrum to describe angelic weaponry, if that helps at all...)

Or it could even be something like a katana that has a theurgic laser lining its edge, which would have the same effect.

About all I can think of for now.