So I beat him twice and one thing he got me was a sword that "the warrior princess xenitha" had used, and another was the armor or some due...but I don't see anything like that in my bags?

I have a dun banner cloak but I have no idea what that's for and it's a quest item.

There's a bug where sometimes the sword doesn't appear in your inventory, but I've never heard of the armor also disappearing. Either way, the closest thing I've heard to a solution is to reload an old save and try again. I don't have any first-hand experience doing that, so I can't say that it works for sure.

The quest item comes into play later, so don't worry about it right now.

The cloak is for a quest, but totally optional.

The sword is a rusty sword, as one might expect of a sword that was wielded by some ancient warrior princess.

sword is terrible. princess must have tricked Skalen.

the sword is just a gag, have you heard of 'Xena, warrior princess'?

Its just a pop culture reference they added in for fun. Another thing he mentions is a guy named Blascowicz who was searching for a spear, BJ Blaskowicz happened to be the dude in all the wolfenstein games, one of which was called the 'Spear of Destiny'

there's quite a few others too, just can't remember off the top of my head

Maybe not pop culture references, but references nonetheless: The passwords in chapter 1 are Heidegger and Kierkegaard, pretty famous philosophers both :)

on the Cure Saskia Quest, Iorveth and Geralt make fun of some Lord of the Rings scenes like power rings and walking naked to the top of a volcano.