I agree that they should be very rare, and ofc they shouldn't be "better" that other equipment.
Imo they should only be found wielded by difficult, hidden, optimal bosses (You shouldn't find these by simply following the main event/quest line. Or as hidden treasure like the tomb of King Arthur III.
The difference between a Steel sword and Satan's nail (Which is a cursed Steel sword) should be something like, if u do a thrust attack, and it pierce, it burns the targets intestines, but at the same time it slowly burns the wielder.
So it's still a steel sword, with added buff and debuff.
Or Witch Holgas sanity. Which would be a dagger that slowly drains your sanity (This effect would be visible with that your character starts to lose balance, then hallucinate and so on)
However each time it draws blood from a creature it takes that ones sanity and give it to you, and if you get over 100% sanity, you would get some kind of buff, but when it drains from 100 and down the debuff should slowly "crawl upon you".
These effects should also not be obvious in the form of a text that clearly tell you the buff/debuff. Rather it something you should have to find out or by visiting a Master identifying npc.