Where is the boomerang sword?

Solution 1:

You have to unlock the door in town (you'll need at least 6 keys) right under the gun shop. Move through that area (trying not to spoil: a lost forest of sorts, and a tower of enemies, some story etc.), in a relatively straightforward path. Once you complete the tower you'll get the boomerang sword and you'll have to fight an archer boss. I'm not past this area yet since this boss is pretty challenging.

I found this gameplay video that should help you find that area/sword but the skill level of the player is pretty rough and they never make it past the boss either. But it's a good reference for location.