If you enter into this book expecting a novel, or something as intricate as House of Leaves, you are going to be disappointed. The size of the book is deceptive until you open it and see the sparing amount of text per page, and how 50% of the pages are reserved for art. I think this, more than anything, is the reason for this book's chilly reception. If expectations can be set aside this book is actually a delightfully dark little surprise.
What Danielewski has crafted with The Fifty Year Sword is a modern Grimm's fairytale. It's a folk story filled with curiosity, imagination, and darkness. You can read it in one sitting, which I highly recommend doing. Curl up in a dark corner and settle in like you would for a storyteller, which just so happens to be the format of much of the story. Give it your full attention for a few hours then move on, richer for having spent the time in a creepy world where magic lurks around the corner.