Agreed! I almost want the "negative levels act like positive levels" on undead, but I think that's too far from core...
Can we cut the run-on, though? "... an undead creature. If the sword deals a critical hit, it bestows..."
Well, something seems off with the attack and damage values, I think. Let's give him MWP (longsword) for the death stealer, so the attack bonus should be +9, I think (+6 BAB, +1 Str, +2 enhancement).
Well, the original text specifically calls him out as "once human." Sounds like we could wangle giving him a couple levels of fighter based on the flavor text, though.