The sword is a visual thing, it's irrelevant. When you hit B as Rosalina, Luma shoot star bits wherever it is. When you hit B as Rex, Pyra does their Neutral Special wherever she is. In the actual game, the sword has no problem teleporting huge distances because you started an attack in one place and then ran to the other side of the enemy with your increased movement speed. The upside of all this is that you can make combos that wouldn't be possible as any other character. While Pyra is stunlocking them with a flame pillar or spinny fire sword or whatever the hell you have her doing, you're maneuvering to be in position for a well-placed aerial the moment it ends. Luma and Nana not being able to act while grabbing isn't much different from tethers being totally removed, only to be reimplemented for DLC characters and Ivysaur. The flow of chaining auto-attacks into blade specials and the positioning opportunities it affords is what this moveset is going after.
If they're both being attacked, yes, that should be punishing to you and an incentive for your enemy. On the other hand, if they miss and only hit one of you, you have a safe punish and take less damage. If they individually take 75% damage, then hitting only one is a waste.