I always thought why they never used phoenix downs was because party members who fall in battle are "only mostly dead" instead of dead-dead.
The fact that it transforms though would make it rather flimsy. A collapsible weapon would not be able to block a giant sword like that. Again, if they said they were enchanted, or made with some kind of super-metal, then it would make sense. Kingdom Hearts never actually pushed my suspension of disbelief because magic is coming out the wazoo in that series.
I actually liked Eiko. I know people found her annoying, but she never bothered me. Another unrealistic thing about Eiko is that at one point, if you leave all the magic users behind at Kuja's palace when you go to Oeilvert, she actually leads the party, despite being a six-year-old girl.