In the last Forgotten Songs commentary, Bix found a powerful magic sword. When he uncovered it from a goblin cache, it was rusted and dull, though it radiated magic. I found both the write up for the sword and the information revealed by bardic knowledge checks in The Blue Notebook. Here they are:
DC20: You have heard of magic weapons that appear rusty and disused to better protect themselves from being targeted or stolen. Even though they look shabby, they are quite powerful.
DC25: You remember something in one of your uncle's lectures on Lienster Organizations about a group of wandering knights. Devoted to the cause of good, they each wielded shabby looking swords that were of considerable magical power. You also remember that the blades were supposed to increase in power when used to defeat evil.
DC30: Oh yes! You actually saw one of these blades in the possession of Sir Kenneth Steelcrown. Parts of it looked dull and rusty, but other parts shown mightily. He told the tale of the blade: It had been forged by the Knights Dormir (also called the Sleeping Knights) and was part of a set of weapons wielded by the group. These swords, called Angkrysts, were given to new Knights upon being accepted into the order. Enchanted to help the cause of good, hey also grew in power as the warrior who wielded them defeated evil foes. This was done to be ever vigilant against evil and to seek glorious battle. Sir Steelcrown told the tale of his blades activation when he slew a ghoul. He also said it increased in power when he killed a troll and again when he defeated the ogre cheiftan Grannoth (who was also a cleric of some dark power).
Ok, it's late and I need to get to bed. The actual stats of the item I'll post tomorrow.