I am having a bit of a failure of imagination while reading the Monstrous Blood supernatural flaw in the Magic realm book. Specifically regarding Magic Thing.
Every time I try to cross a thing with a person, I keep anticipating a cyborg as the result. Which shouldn't happen in Mythic Europe.
Perhaps I need to take a step back.
What happens if there is a knight with a family heirloom that is a powerfully magic sword? Passed down from father to son for generations.
Say, from the last generation, the father of the current knight was called from his marriage bed to defeat an enemy, won but died from his wounds. With last breath gave newly pregnant wife the magic sword with the instruction to pass onto the child when it is born. The widow keeps the sword by her side all the time, even sleeping with it.
Could the baby be then born with Monstrous Blood from the magic sword? And if so, what is the monstrous deformity the baby might be expected to have?
Note that elementals are "Magic things" too. So one could think about the birth of Danae, or simply imagine elementals like the kelpie that take animal shape (or perhaps even human shape). And animated trees and other plants, such as the mandrake, count as magic things too.
That said, note that in the description of Monstrous Blood nothing says the Magic thing must be the character's parent. It just says that the character has been changed through exposure to the Magic Realm, often because of a relationship with a magic being. So there's no need for a magic sword to have "sired" the character with monstrous blood (I find no way to put it in a way that does not sound like a bad joke). If the character was exposed to the magic sword in a sufficiently mythic way, he might have been "changed" by the sword even after birth.
In terms of mechanics, the Magic Thing blood gives the character an undesirable Lesser Power that activates, or is constantly active, outside the character's control. In the case of a character associated to a "generic" magic sword, my first choice would probably be a PeCo(An?) power that wounds (specifically, cuts) whomever the character touches. An alternative would be a subtle ReMe power that induces other people, particularly those with a "warrior" background, to challenge the character to a fight. But of course, if the magic sword had some particularly mythic power, the character's own could well reflect that: say, a flaming sword might produce a "flaming" character.
I am suddenly reminded of the mythic origin of the Merovingian Franks, in that while pregnant with the future King Merovech, his mother encountered the Quinotaur while swimming, and that the Quinotaur is considered to be one of his fathers.
While re-reading this, it occurs to me that you might have misinterpreted what I wrote.
I recall medieval tales where a knight might share a bed with a maiden, and by laying his sword between them. The idea being that the sword would cut anyone dishonourable enough to cross to the other person. I was sort of extrapolating that a widow might also have her late husband's sword in her bed beside her to assure, um, her chasteness was kept undisturbed.
I was thinking near proximity to the magical radiation/emanations of the sword caused the unborn child to mutate/monstrify.