I am at level 4 in Oblivion and have completed the canvas of castle quest in Chorrol. The Honorblade is weightless and currently the most powerful sword available to me. If I give it to Fathis, the quest will complete -- but then how can I get it back?
There is no way to complete the quest without losing the weightless version of the sword. If you want to use it, you may as well go out and complete some more quests -- Fathis will be happy to take the sword down the line when you've found more powerful pieces.