1filed as a broadsword, plays like a knife
The reach is close to nothing. You have to be standing on top of an enemy for it to connect, which for most of pre-Hardmode means eating contact damage the entire time you are attacking. What you get in return is a swing rate that almost nothing else at that stage of the game can match, so any fight you can survive at zero range ends very quickly.
melee speed works in steps
Only half of any melee speed bonus applies here, and the swing rate can only move in whole ticks, so bonuses do nothing at all until they cross a threshold and then jump all at once. The first step is cheap and being Well Fed alone clears it. The second needs roughly a third more melee speed, which pre-Hardmode means stacking the better food buff with Tipsy, Feral Claws and a Violent reforge on an accessory. After that there is nothing left to gain until Hardmode gear opens the next step, so extra speed buffs past the second benchmark are wasted on it.
one hit per swing
Broadswords put a short cooldown between hits on the same target, and this one is fast enough to run into a different limit first: a given enemy can only be hit once per swing regardless of how quickly the cooldown clears. Against a single target the swing rate is the damage rate and nothing else, which is why the tick benchmarks above matter so much. Against a crowd it becomes a different weapon, since one swing can catch several bodies at once.
farming it
It only drops during Halloween, only off ordinary weak enemies, and at odds bad enough that hoping is not a plan. A Goblin Army is the best source, because nearly every enemy in it qualifies and they keep arriving in a steady stream with no work from you. Failing that, a Blood Moon with a Water Candle placed and a Battle Potion running is the usual rare-drop setup. Expert once made it rarer through a quirk in how Halloween drops scaled against enemy health, which was corrected, so difficulty no longer works against you.
lineage
The design is a direct nod to Freddy Krueger, which is why the game only hands it out at Halloween. The Fetid Baghnakhs is the same idea again in Hardmode, and it is a straight replacement rather than a sidegrade.