Stahlkurtan is a great magic item. This is patently obvious; in a sea of +1 or +2 magic weapons and shields Stahlkurtan is a +5 magic sword which can also be used as magic armour. More importantly though, Stahlkurtan is not overpowered–or more particularly–Stahlkurtan is only overpowered compared to trash which shouldn't be the standard by which magic items are judged and measured.
+1 and +2 swords are unexciting. This is not a new idea and some (Raggi) have proposed making magic items more interesting and less predictable and commonplace. This is not a bad idea but the solution need not be to make every magic item cursed, because magic swords aren't boring (just) because they're commonplace, they're unexciting because they are such insignificant incremental improvements.
Incremental improvements are still improvements, and they matter. That's why levelling up matters, but (unless you're a magic-user) levelling up doesn't change the character or how it plays. A fighter with a +1 sword is exactly the same as a fighter with slightly better STR, which makes a difference but a +1 to hit only matters 5% of the time. My first character, Connor, had 5 strength. When he got a magic weapon it just helped cancel out some of that penalty, which wasn't that big of a deal anyway.
Stahlkurtan the +5 defender shortsword is everything that lesser +1 magic weapons are not. Stahlkurtan is ridiculous and it makes whoever is wielding it The Best Swordfighter. He will hit noticeably more often, and every hit will be a good one. To be "overpowered" I think an item has to be so powerful that it make things less interesting. I don't think that this is the case with Stahlkurtan and I would argue that it is still less powerful than a wand of lightning or medusa's head in a sack. I would also argue that those are also both great magic items that actually make play more interesting. The lightning wand has all kinds of logistical difficulties with using it, the medusa's head is, frankly, a terrifying accident waiting to happen every time it is used. And even though the owner of Stahlkurtan is The Best Swordfighter, it still only improves upon the limitations of whoever is wielding it (though if it were held by a character with ridiculously good DEX and CON and maybe the saving throws of a halfling…)
other sweet magic items: ring of telekinesis (for obvious reasons), cloak of invisibility (observe enemies without immediately rolling initiative), ring of fire resistance (totally changes how you approach fire), ring of regeneration (totally changes how you approach risk and death), and even the +1/+3 vs. undead sword is cool because it has a clear function which it is reasonably good at. Gauntlets of ogre strength are also cool ( the +3 bonus is cool but equally cool is being strong enough to perform ridiculous feats of strength).