So a blacksmith named Freeman said that if I brought him steel, he would give me a sword. Well, I did and he hasn't.

And before you ask, I spoke to Penrith (or whatever his name is) and confirmed that I had already cleared the specified area before returning to Freeman. Now he speaks as if he gave me the sword, but I never received it!

My inventory has plenty of space too.

What could be causing this?

Hi,

Vanishing Items (until version 1.03.1 - inclusively) can be caused by pressing esc while an inventory interface is opened. Even if some time has passed between pressing esc and receiving an item. That's at least the only reason I know why items don't show up.

Another suggestion: Maybe the sword lays on the floor.