This should not be considered the only way to make a nice wooden sword, but it definitely makes a nicer one than you can usually find. Most of the work can be done with hand or power tools. The blade itself requires the use of a tablesaw.
As such the usual disclaimers are invoked. The use of tablesaws and other power tools can be dangerous. Take appropriate safety precautions and if something seems unsafe to you, stop.
Step 1: Step 1: How to Make the Blade
Rip a piece 1 3/4" x 1" x whatever length you desire (I ripped 48" pieces and later cut them down to 24").
When you've cut all your pieces (if you're making more than one sword) change the angle on the tablesaw to approximately 15 degrees.
You will be making four (4) rips.
Follow along with the picture (crude, I know).
1st cut will give you your first bevel. It should be exactly in the middle for the part of the sword blade in the air, and slightly past the middle for the part of the sword blade resting on the table.
The idea is to get a crisp bevel on what will be the side of the blade and a small (1/8") flat spot on the "edge" of the blade. Less chance of a horrific injury when the kids are playing with the swords later. For the purpose of clarity we'll call the end now towards you "A" and the end that will be cut first "B".
For the 2nd cut, flip the piece so that the 1st cut is up and towards the fence. "A" is towards you.
For the 3rd cut you will flip the piece end-to-end so that "A" will now be cut first and "B" is towards you. 1st cut is still up, but away from the fence.
For the 4th (and last) cut, flip the piece so that the 1st cut is down towards the table and against the fence. You may have to adjust the fence a small amount so that the cut matches the other side.
You now have a sword blank. Cut it to the desired size.
Step 2: Step 2: Make a Hole for Doweling the Pommel
Step 3: Step 3: Finishing the "pointy End"
Step 4: Step 4: Making and Attatching the Crossguard
Glue and nail the pieces together. Sand, or otherwise shape the crossguard to it's final shape. The side of the crossguard is a good place to write a name on with a dremel.
Slide the crossguard onto the blade (you may have to do a little more waste removal).
For these relatively small 24" swords, I choose a hilt length of 6". If you're making a longer sword, feel free to make a longer hilt.
Step 5: Step 5: the Pommel
Follow the sequence of pictures to get an idea of what part of the bannister I used.
You can make the pommel as plain or fancy as you want. I choose to stamp the sides of the pommels with some old embossing tools I had.
I chose to dowel the pommel on. To do that drill a hole centered on the blade and on the pommel. Cut a dowel to length, test fit, and then glue.
Step 6: Step 6: Have Fun
Feel free to finish the wood anyway you want. I mostly don't finish the swords unless I wax them.
You can also shape the hilt to be more comfortable to hold (whittle, sand, etc.) and also cover them. I've used leather (one piece cut and sewn to fit and even strips) and even Gorilla duct tape. An old belt will work.
JUST ADDED - I just tried a new way to wrap the handles. I used a piece of old heavy wool blanket and wrapped it around the handles with black cotton hockey tape (any sporting goods store that sells hockey equipment will sell you some. I bought three rolls for $6.99 from Dicks Srorting Goods and used one roll to wrap twelve sword handles, with some tape still on the roll.
As you can see I also make longer swords. All four of my kids enjoy using them (And their friends!) from my 13 year old down to the 3 year old, although her "two-handed" sword is much smaller.
If you have a lot of young relatives, consider making a batch of these for Christmas. These also make nice "craft fair" items for the holidays. The process lends itself very well to making multiples at the same time. You can take a few minutes for each sword and personalize the pommel and crossguard.