Why explain it in meta, instead of the old trustworthy totally-not-a-witch saying it only affects evil?
It also defeats the point of the exercise. The paladin is nolonger responsible for the murder of those innocents because he was lied to about the true nature of the sword and would have no way to find out the truth without killing an innocent person.
So it’s not the paladin doing the killings, it’s the DM.
I think you missed the point of the exercise.
The Paladin is using the sword in place of a moral compass. They stab people upon first meeting and trust that anyone who dies deserved it. If the sword weren’t good aligned, this would be heinous behaviour.
So make the sword evil. How long does it take for the Paladin to stop doing evil deeds in the blind belief that they’re doing good? Does the Paladin take responsibility for stabbing random townsfolk, or do they try to blame something else for their actions? Does the Paladin just straight up fall to evil, supporting wicked people in the blind belief that they must be the real good guys?