Could it perhaps be made of a black soulgem? If its made to capture souls that would sorta make sense. As for the op the only relevent info I have to spare is that Clavicus Vile claimed it contained the soul of a Hero named Umbra. I know that it (either the soul in the sword or the sword itself) eventually poccesses the user.
Not really, the vielder just looses his sense of himself. Well, that is almost the same thing, really, so it doesn't really matter. But anyway, for example, the Orc-Umbra did not seem to me like a possessed man. He was himself, but he had forgotten who he was - so he called himself Umbra. He wasn't possessed, for if he would have been, he would not have been able to ask the PC to kill him. Remember, he was not unable to kill himself - he just wanted to die a warrior's death.
After reading through the Morrowind dialogue - it also seems that Orc-Umbra might actually remember who he is, but does not want to tell the PC, for it does not matter, according to him. However, that might still just be lies to avoid admitting that he actually doesn't know.