As the title says, we're going to play with the sword and the swarm today. You see, the fact of the matter is, one sword stands out like no other in the game. The Faust/Grand Faust. The dark half of the Avenger/Divine Avenger. The only weapon in the game that can inflict curse. Pretty significant. But what if there was more than what we knew?
THE SWORD: The changes to the Sealed Sword: A third upgrade tree. A key.
As I had found out shortly after obtaining the Sealed Sword, its charge attack caused a random status effect AOE, which was incredibly useful, unique, and interesting on its own. However, when upgrading it into the Faust, it lost this capability. Disappointed, I asked multiple people in-game if they thought that they should do a similar thing like with the faust/avenger, but with a larger AOE radius instead of projectiles for its upgrades. They agreed.
The Gran Faust or Divine Avenger would act as keys. More on that in the story.
THE SWARM: My personal take on the origins. A boss. Travesty.
A legendary blade of uncontrolled and unparallelled power. The Gran Faust, a weapon of a legendary knight of the clockworks who's actions were questionable. The results were not. The blade, praised and feared for its raw power, surged, ebbed, and flowed with the blood of its enemies. Innocent? Guilty? It was irrelevant. the blade struck all.
And that's where the problems arose. This knight descended unchallenged through the clockworks, eventually reaching the core. Alas, a sight to behold, and the core opened wide, an event believed to be a myth. Unfortunately, the blade become sentient and wished nothing more than more victims and to grow in power, tainted by a fragment of The Swarm, for the knight fought fiercely to hold back the ancient threat, enough of the swarm eventually seeping into the very blade itself.
The blade and the core caused a reaction with a backlash, creating an unholy dark energy which shook the clockworks, cracking the blade into two. The esteemed knight who carried the blade painfully turned into a violent beast of untold size, The Swarm-Host was born. A massive millipede-like monstrosity. was all that remained of the knight. And so, in time, the beast was sealed away, but its mass seeped into the clockworks. Seeking its blade. Tirelessly.
The two halves of the blade were found powerless within the clockworks. The darkness could not be removed, but the light could be added, and lo, it was. But a powerful blade in the wrong hands could cause even more horror. and so its power was sealed away until the day it could be unleashed. But the blade knew. It always knew. It compelled them to find it. to remake it. And who can resist the allure of a blade that can cause foes to harm themselves? Power comes at a price. The beast awakened. and so did the sword. drawn to each other
And you delivered it hand and foot. Crap.
The Host: The boss.
The Swarm-Host would be a boss far larger than anything else encountered in spiral knights. Sadly, I have no ideas for it yet, but they will likely pan out in time. All I can think of so far however is that you'll be fighting it throughout all of its stages due to its size, rather than just a specialized floor just for it.
It's written very well, and the concept is very interesting. Although, the lore for the swarm seems flawed. From what I understand, the Swarm was an entity already present at the creation of Cradle, as the planet was created to protect "something", and that something fears the Swarm. Also, I hope by knight you don't mean Spiral Knight, because the Alpha Squad were the first knights to enter the clockworks, and they encountered the Swarm when they reached the core. This means that the Swarm is not of Spiral Order origin.
My assumption is that the Swarm is some spiritual entity that is hell bent on destruction and darkness. Whatever is inside the Core is the only thing that can truly oppose the Swarm, but the Architect (King Tinkinzar) of Cradle betrayed it and sealed it inside the Core. Because of this, the swarm is free to spread it's madness throughout Cradle (with the help of the gremlins).
Alternately, whatever is inside the core can be compared to some God-like being that has the ability to create life and entire worlds with just their mind. The Architect helped shape this raw creation power into purpose, and helped this God-like being create Cradle in an attempt to protect itself from the Swarm, one of it's past creations that has turned foul. The Architect however, tainted by the evil that is the Swarm, betrayed the God-like being and trapped it inside the core. This allowed the Swarm to spread across Cradle in an attempt to enter the Core and destroy the God-like being.
In both cases, the Swarm has not completely taken over the planet because the mere presence of the being inside the Core suppresses the power of the Swarm. This is evident by the existence of the Sanctuary after every SL, as this is the only point closest to the Core that is out of reach from the Swarm.
TL;DR
Fix your backstory to actually comply with the current lore of the Swarm, the Core, and Cradle itself and you will have yourself a good idea.