I got the legendary Sword & I don't know what to do with it except for cutting weeds.
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If you go over to where the big stones are at the waterfall you can press the A button and it will bring up a cut scene. After the cut scene you find that you have removed the large boulders using the sword. You can now go into the field behind the waterfall!
Have fun! ;)
Like hm_hottie_1357 said, equip it, and press a next to the big rocks to break them. The field behind the waterfall is the most fertile field in the game, that means you grow things alot faster. You can grow trees but it's just a waste of space because they can't bear fruit. Unlike the basement, you can only grow crops for the current season in the cave.
P.s. Rumor has it that there are other rocks in the game that need to be broken with the legendary sword!!!!
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