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I was thinking the same thing. Granted, I still need to get to that point for the sword to test it.
I had just finished doing everything else and was about to start volume 2 =(
So you either discarded it by accident, or you encountered a weird bug that deflagged the Flame Sword as a rare item.
Also to answer your original question, yes, any item you sell at a shop you are unable to get back. The only thing you can do at this point is reload a previous save.
You do know there is a storage at your guild? I would recommend just storing all your rare items.
You just need to have held each item at some point in the game to get the book of 1000 filled, you don't have to actually have everything in your inventory/storage all the time.
You could trade it back to matsu (as long as it's in your inventory once you'll have it count to ryu books), and he'll have it back. However if he has better gear he won't equip it - and it'll be up for trade. Sooo you have a sorta spare/tradeable storage.
Matsu refuses to equip broadswords anyway so that doesn't matter.