The Sparda sword is in its true form, yes. And?
The sword is awakened in its full power, but If Nero is Sparda's reincarnation, he has been reborn with full powers. The powers of the sword are something else, they are there still.
And about Nero...
Always have thought and said that the way Nero was introduced in the series was done with major plot holes. He just didn't fit enough to synchronize the way he should have been synchronized with the whole storyline, because other major plots were left with unfilled holes.
Devil May Cry 4, in other words, should have been the game where we would've learned Vergil's true fate, some ties with the manga, the anime, the novels, aspects of how the hell Trish and Lady were there, more chronological details as in how many years have passed, how old are the franchise's characters (I personally know some details but they're exclusive or better said, not open to everyone's curiosity which sets apart true devoted franchise connoisseurs from casual gamers which are stubborn and tend to inflict major headaches and whatnot.)
There's nothing wrong with Nero as a character. He was shown in the wrong time, as he was not needed right now, but most probably in DMC5 and DMC6 at the max.
