The Engulf Sword can be found near Granseal's (the city) "Blood Volcano". Search the exit of the path, near some bushes. If you equip this sword to a cursed team-mate, you wont be able to "unequip" it, but you wont want to anyway, whereas it casts the famous "cover" spell each time it is used. The cover spell puts a blackish-grey cloud over your enemy and slowly drains the mp, hp, and kp, much like the "Jilon" spell.