So, I don't know a WHOLE lot about glitching or sequence breaking in Link's Awakening, but I do know that the sword is necessary for the final boss (Form 2). I was derping around on Youtube and found this video that shows that a Swordless run may be possible. I dont know if you guys have already found this, but since there isn't a Link's Awakening Trick Discovery thread, I couldn't exactly check to see. xD
http://www.youtube.com/watch?v=6x-prO0h_14