Did a little bit of research... I might have made a mistake.
I didn't have any problem reading the colored blur as the axe in motion- I think Link's sword swing is this way, right? That'd probably be a good reference for how Nintendo makes the motion blur of an attack work.
Also, it seems strange to me that the Iron Knuckle is swinging his head around with his attack. Like, usually when you swing a sword or baseball bat or whatever you look at what you're trying to hit, you don't just follow the end of the bald with your eyes. I think when Link attacks, he keeps his head forward in the direction he's attacking, right?
1. Yes, Link's sword does have a bit of a motion blur when he swings it. Also when he's using the Spin Blade technique. HOWEVER, as far as I have been able to observe,
none of the large grunt enemies (Darknuts, Keatons, Moblins)
use motion blurs for their attacks. In fact, only Link's sword swing has an effect even remotely resembling a motion blur, with the one exception (maybe) of the Darknut's stab-and-twist attack.
2. Well, kinda.
See attached image. From the one angle we can tell (facing south), he actually seems to keep his eyes on his target. But he does turn his head.
My suggestion though (and I know this is a bit of a pain, so it's up to you if you want to do it) is to have the blur throughout most of the swing animation instead of just 2 frames. Otherwise it's gonna look like a blip instead of a smooth blur
I'd suggest this, but then again, there is no motion blur found in a bunch of MC-styled foes. However, the Iron Knuckle's insta-kill-if-you-are-doing-a-3-heart-run axe attack can be made an exception.
As a general animation rule of thumb, a one-frame motion blur is supposed to basically resemble a very fast motion since you have to flatten every tween into one frame. For the Iron Knuckle we want an attack that connotes more strength than speed, right? So if the motion blur were spread out to two, three, maybe four frames, that would do it.