Here's me running around in Kamadan with a Fiery Dragon Sword.
And yes, everyone else can see it! (it's not just a client-side glitch)
I discovered this a few days ago, and I'm going to tell you how I did it. 
Just in case someone wanted to take guesses, I hid the methods in the following:
Preparation
Get the Everlasting Legionnaire Tonic.
It can't be traded between players, so you have to get it during Wayfarer's Reverie (comes every August).
Method
- Target a stationary non-player character (NPC) or object (such as a signpost) as far away as possible.
- Click spacebar to walk towards the target.
- After you start moving, use the tonic, and do not change your trajectory.
You will start holding the Fiery Dragon Sword as soon as you use the tonic, but will only change into a Charr when you stop moving.
This creates an effect of running across the town holding the sword. 
(you can use the tonic again for the same effect: you change back even when using it for the second time while running)
Have fun! Hope you enjoyed it!
Bluey
PS: for more mysteries...
look here
A golem just hanging still above the cliff, too lazy to do the Z-quests. 
