Modeling/Art non-related to Amnesia / SOMA

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(1) In blender, how can I draw my own normals/specular maps? I can't multi-resolution the dagger because it becomes very curvy and about half the size of the original and looks like wet pasta clumped together.

Don't worry, what you need is not a hand-drawn normal map but simply a bit of knowledge about hard surface highpoly modeling! (which is quite different from organic high poly sculpting)

The keyword here is "supporting edges" which are essential for that form of modeling. Basically, what you do is you surround every edge that needs to stay sharp with additional edges, so that your subdividing/smoothing will keep
planar areas planar instead of turning everything into a blob. The closer the edges are together, the sharper the result will be. It's easier to understand with a picture, so I made you one:

Spoiler below!

Just remember to make a copy of your dagger before adding supporting edges, so you don't have to delete all those additional edges again when making the lowpoly version for the bake...

The same principle applies to non-subdivided meshes btw, when it comes to smoothing. (soft edges, smoothing groups...whatever you call it) It's how you can have softer edges on meshes with non-unique normal maps, like buildings for example. Of course it raises the polycount quite a bit, so only use it where the player can actually see it!