you might have hit the hero save vs world save bug. do you have a copy of the original fable or lost chapters? is this on the pc or xbox?

the hero save glitch is where in middle of a quest you can do a hero save to save all of your characteristics but be able to restart the quest. so basically what could've happened is that the game has recorded you as having already thrown the sword into the vortex but then didn't do a world save to save that quest as completed. whenever i had game changing options i always saved to different save files.

as far as i know, whether you are good or evil, the end game all depends on if you choose to keep the sword or throw it away. just to be sure, you are holding the button to be able to target in non combat right?. i also don't remember you having to kill your sister yourself. i just threw the sword in and it went to a cut scene where it showed my hero killing the sister.

btw, if you get lost chapters, there's a new ending where you can get an even stronger sword and there's a new final boss.