You get a three block deep down hole, fill the hole with lava, and drop the sword into it. This would destroy the sword though, which I'm sure you don't want. Other than this, you can also enchant a sword with fire aspect, which won't set the sword on fire but will set mobs and players on fire when they are hit with said sword.
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You can make a diamond sword in Minecraft by placing two diamonds above a stick in the crafting table.
You need the Aether mod.
You can't, unless you're using mods.
Have a sword. make an enchanting table. Have levels. Put the sword in the enchanting table. Click a available enchantment. BOOM a better sword. Bookshelfs gives you better enchantments for higher levels
Twilight sword