In my last long running 1e campaign (that ended right before the playtest started), we had a paladin in our group, and yes, he wanted a holy avenger. We were running T1-4, and one of the arch villains was a half ogre wielding Blackrazor (long story). After finally beating Zuggtmoy and that half ogre, the paladin got a vision that he'd have to take the evil sword, have a white dragon breath on it, and then smash it with Whelm. Only then could he take it to a high church of St Cuthbert and have it reforged into a holy avenger. So naturally it was a pretty significant quest item
As far as worst magic items I've seen in 5e so far? Hezeron (sp) from HotDQ. A greatsword that inflicts an extra 2d6 damage above and beyond normal was like giving a cheat code to the fighter, largely because it is found at such a low relative level. I've never been one to really care if another PC did more damage on average, but that sort of goes above and beyond.