Power is worthless if you don't know how to use it, and besides, remember all the new moves and abilities you can unlock during the game? It is a game mechanic, yes, but it also indicates that they actually learn new moves and abilities as they gain experience.
Already answered, all Order swords have that ability. Red Queen is only unique because Nero modified it to allow it to unleash far stronger flames for a period of time.
And in any case, absorbing some artifacts did give him new abilities (Indiana Jones' Crystal Skull > Snatch, Creepy Fruit > ability to kill Creepy Growth; Yamato > Devil Trigger).
Precisely, unless there is some upper limit on power. But even so, it comes down to experience, and Dante will always be more experienced. Even if Nero were to (somehow) gain raw power/abilities that outmatch Dante's, it still wouldn't be enough since he doesn't have enough actual experience to use them in the most effective way... kinda like experienced Agressor pilots at the Red Flag used F-5s to obliterate opposition consisting of F-4s, F-14s and F-15s. Better theoretical performance of more modern fighters didn't matter because Agressor pilots were much more experienced.