He saw Lime naked, but still had that Admiral Ackbar moment? Does he have some trauma that he's dealing with?
Also, for everyone criticizing him for being scared of a normal sword: he literally doesn't know how own abilities right now. He's still operating under his understanding of himself from the previous world. He also doesn't know how sturdy he is. He was able to block Dex's attack, but that was in the heat of the moment and was a blunt attack, not a bladed weapon. It's not completely moronic for him to be worried about being cut. It IS completely moronic, however, for him to go out there without any apparent plan.