Just wanted to know if a normal sword swing auto attack damages enemies in a small area of effect like in Torchlight 2?

No. The most basic attack doesn't do AOE.
Although, both melee masteries provide replacement for default attack, which DO aoe.

I believe it is blade arc that you are looking for.
If you go for two handed you can combine soldier with druid and have about 5 skills that will prog at once that you can attach on attack divinity spell onto.

The net result is that you do massive DPS to about 12 enemies in close combat range and you can stack this 'nova' like basic attack with a gear specific retaliation build (as i pointed out to someone doing a retailiation build my build is almost strictly skill tree/divinity based).

It really craps all over both my straight phys Rifleman build and Pure Aether Ray only build, proving the game is unbalanced in favour of AOE Close Combat spread dam type.

By level 20 a specific damage type DPS will attain about 1k dps on standard equipment; at the same level the one stop shop soldier blade master is effectively doing that same 1k dps but to everything around it without having to contend with the restricted view range.
I'll let you be the judge.

EDIT: Oh and also to most damage types meaning less overall ability of mobs to resist said damage.
Eg. if you use aether ray (half fire half aether) and something is fire immune you lose half your damage, in the same case but doing 8 damage types a soldier will lose 1/8th of his damage (12.5%) and it's easier to stack damage all than it is to try and get 2 specific %damages up