I just got a new theory...
Ok... we have a cursed cloak of corruption... theoretically, the cloak is made up of some sort of threads...
We have threads of life
We have threads of fate
I wonder if the threads of life and threads of fate can be used to uncurse the cloak of corruption and create an entirely different item. A beneficial item.
Perhaps you could craft a cloak of fate or a cloak of life...
I think the sword and shield will be upgradeable too... they obviously are garbage items in their current form, but I'm picking them up just in case... besides, they've told us that pub 52 will have turnins for items that look like they're just deco... perhaps the sword and shield are this type of item. Also, I could see swords and shields being used to classify you as an etherial slayer. Kinda like turning in elf ears to show you were killing elves.