Zhamla's sword has the blue here when he kills the mother worm, and it teleports away like it does in the dragon cave.
So... wait. I'm confused. Does he have two magic swords? Or did it get a makeover, and then go back to blue?
In the end, he was the one who pulled the blade, so...
If the 'Bag Is Evil' theory is correct, Bag could have been doing to Dad what Gaantlet did to Winter and Crown to Zhamla. Bag doesn't even necessarily have to be evil, either, artifacts could just naturally imprint or influence their will upon those who equip them. You equip Shiidu and Shiidu refuses to let you even raise it.
Edit The one most damning thing Bag has said in the 'Bag Is Evil' pile, assuming he hasn't lost his memory, is his very first conversation with you at the start of the game. A phrase that was used in reference to Zhamla during Tai Ming.
"Just do what I say and I'll make you the King of Collecting!"
Given what we've seen being the 'King of Collecting' entails, Bag is either an amnesiac, evil or has an extremely twisted sense of humor.