Not sure if it counts as feedback, more like a sugestion? I was browsing the item lists and noticed Lilarcor parcticaly untouched. I have an idea to balance it in the form of a -2 reputation drop, similar to Viconia's when she joins the party. Given its constant calls for blood, it sort of makes sense that people would suspect of anyone brandishing the weapon.
Because reputation changes are more limited in BGII, it could be a decent penalty for an early weapon for both evil and good parties. Between the increased shop prices and the cost of buying your reputation back, Lilarcor would force most to take some detours before picking it up. Evil in particular could get dangerously low by picking all Dorn, Viconia and Lilarcor in one sitting so they would need to pad their reputation a bit or risk fighting the guards early on.
The problem with this would be scripting the reputation drop to work whenever its picked up, or rise when its disposed off, I don't know if its posible. Otherwise you could give it a -2 charisma/inteligence or even a new -x reaction if it were posible, though not nearly as efective.