well it changes it into a dagger and then it lets the metal stay like that,so it just changes the shape and lets it stay like that. It's like if it was putty and you had it in the shape of a sphere and then you puled on tat sphere and now it stays as an ovoid or ovaloid or ovaltine however you spell it. and personal item updated.
Nope, you're assuming lvl 2 magic is going to let you permanently alter something. It would only remain in the shape whilst you are focusing on it and at lvl 2, that would take ALL of your focus. You wouldn't be able to fight.