For context, they managed to successfully accomplish an impossible task (defeating a Lich with it’s minions) to save their tribe’s armoury and magical item stash. So their master, an Ancient Red Dragon, will give them an item from his own collection
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Hmmmm. This would be a weird addition to the game. Since they are monsters themselves XD
Yeah, you’d definitely want to keep a sword like that happy, since it might decide to disintegrate you. Plenty of other options for its goal (who it wants to stab) that might be more interesting narratively.
I was just describing one the most OP swords possible in the original DMG — and when just about everyone is a “non-human monster” that’s the power option.