I made a sword using blender, and it seemed to turn out fine, the texture mapping stayed with it fine too.
My problem is that the shading looks terrible when i use a light with it
As you can see, it's like it only lights up individual faces. Will i be able to make this look nicer with a shader or something? Or will i have to subdivide all of my faces?
Try using the mesh manipulator (from smgr) to recalculate the mesh's normals, that could be part of the problem here.
Or it could be just the limitations of per vertex lighting when you have very few polys in which case you could sub-divide the polys or use per-pixel lighting (which is probably how blender lit it) by using a shader.
no problem recalculating the normals when you load a mesh, it's a pretty quick process and you'll only really load meshes during a loading phase so it wouldn't affect your gameplay.