I would definately add additional drawbacks, such as the wearer has the viewpoint of undead, so life is both visible, hunger-inducing, and induces hatred. The wearer would need to have strong willpower to avoid falling into the mind-set of undead. Go to Comment
Friday the 13th horror, and almost a Garage Sale From Hell item, apart from its obvious utility as a weapon. In any case, it could be the start to a murder mystery, though I expect it would be a fairly short one due to its effects.
I had a hollow-bladed 'rambo knife' when I was a kid. It sucked - the hollow made the handle weak and easily broken.
The idea of a knife of storing is not a bad idea, but as moon has said, the presentation needs work.
Spellcheck is needed on this, see "To retrieve soemthing from the space, the user reaches into the space just like a bag of holding, but thier arm is shrunk to fit inside the handle." for two typos in one sentance, not to mention the typo in the summary text.
I like this item - and an item that delivers small volumes of magic liquid effectively twice a week is not that overpowered, unless there are some extraordinary liquids available in your universe. If it said 'potion' instead of 'liquid' then this puts an implicit limitation on its power. A powerful item, yes, but not overwhelming.