There have been a lot of people asking me where this thing went, so I thought I would just explain here to avoid the many many emails. =)
The glowing merc sword was a special quest item that was created for a quest one night. It was only meant for one person to get... a "unique" item. THAT is why the stats are so friggin awesome on it. However, somehow the sword got put on normal mercenaries... so everytime a little dinky mercenary in the sewers would spawn, he would be holding one of these awesome quest swords.
Meanwhile, I had no idea this was going on, and every n00b in the universe was getting this awesome sword that was supposed to be a unique item. When I found out... I took it off. That is why it is not there anymore: it was never SUPPOSED to be there.
Those of you that ended up with one should just congratulate yourselves on your luck.
Those of you who didnt get one shouldn't feel bad, because you weren't supposed to have one in the first place.
And to the person who was supposed to have the ONLY one.... I apologize that your "unique" quest item ended up spawning like a tribble. I dunno what happened. Personally, I blame Grom, as he is both a convenient excuse AND he has a history of pushing random buttons that he isn't supposed to. =P
As I have said many times before... if something in-game seems to good to be true, it probably is a bug.