Tried it tonight, and I'm now a lot less worried about breaking the hands. When I first had a look at the space between the fingers and the thickness of the sword, I'm amazed that it actually got in there to begin with. I remember now that I had to use a fair bit of force to get the sword in when I last/first transformed it, but it never occured to me that this would be enough force to break the hand. Also looking at the thickness of the hand itself, it now amazes me that more hands aren't broken.
So, as mentioned above, I got some very fine sandpaper and slowly worked on the thumb and fingers, a little bit at a time - testing the sword often, to make sure I don't go too far and it can't stay in. After a few minutes on the first hand, the sword still needs a little bit of pressure, but no more than plugging in a hand-weapon.
Comparing it to the hand that hadn't yet been done, I found that quite a bit of extra gap was needed (and the sword still needed to be pushed into the gap), so maybe Hasbro had it that way intentionally, so that as the mould degrades over time, the hands can still hold the sword. (like how the Classics Seeker mould now has problems holding the arm guns thanks to mould degradation)
Even though the thumb looks half gone, and the fingers are 'filed' back a bit, you wouldn't even notice it without comparing it to a mint one. The fingers and thumb are still prominant, and the sandpaper was fine enough to not really notice any scuffing (which is mostly inside the hand anyway).
I then did the other hand.
I also tested the dagger to make sure it wasn't affected by the modification, and since it slides straight into the hand, and not past the fingers/thumb, it still holds it fine and firm.
I'd take photos if my camera was any good with focussing close-up, but my descriptions above should hopefully be enough.