I have brought up the issue with Custom NPCs being able to fight with Sin. Mainly along the lines of the skill points, since to be truely customisable they should have all their possible skill points free to use wherever, but at the same time this means its possible to create uber warriors that spawn wherever you are.
As for knives, they are indeed a weapon and so can be used.
Mega-Unfair Advantage when it comes to combat. It's like being able to spawn a small army who can destroy anyone who dosn't have the cp's to spawn anything.