You know, when you put it as "We trust each other enough that we're comfortable with fusing together", it's much more understandable that no one ever uses that sword.
Yo author maybe have one guy in the party be killed by a villain and then the new 2in1 hero will get so mad their hair will be all spiky and yellow.
And then they could go find 7 or so magical balls and call upon a dragon or some shit to revive their fallen comrade.
Just a thought.