Well, Serathos is from hell, so probably not an angel, unless it was a fallen one.
In any case, this sword will be reworked in the future and will probably be given as the result of a miscellaneous quest that is more involved then what it currently is. It may not be a single showdown battle, but may involve fighting back an incursion of demon spawns or something and then defeating the leader of the invasion. I'm doubtful it will be the most powerful weapon in the game though, as I am aiming to have multiple, desireable, and equally potent high end items. For instance, Death's Hand, an axe that is implemented in this upcoming edition, is also, at least thought to be, the product of demons.
Again, none of this is concrete as I'd really not put much thought into it so far, but that is a general idea of the type of thing that will be done with that sword. For now, it has been drastically reduced in power and will be left in place only as a placeholder for what the future holds.