The campaign sword and the sandbox sword are different swords, have different stats, so one might work and the other not. Same name, from the same guy, but different swords, the campaign one has really lower damage and the sandbox has really high damage.
Didn't know that, I also think I was talking about a different sword. I don't think the sword of wrath in sandbox recovers health. Maybe it did, all I know is that it kills bad guys, dragons, shrill lords, and pretty much everything else you swing it at.