I. AM. LISTENING. SHIGGY. *eats hair while waiting impatiently for details*
Also, consider the possibility that the 'new character' is a sort of representation that the player can 'become the sword'. That or it's the sword's spirit.
EDIT: And of course Link will have a sword. *eyeroll* Swordplay mechanics have been mentioned, so I think he'll kind of need to have one for them to work. Unless his new Master Sword is, you know, made of air?
EDIT 2: Two thoughts occurred to me. One horrid, one interesting. LINK'S SWORDPLAH TRAINING. And the other one was that Link seems to be standing between the Master Sword and something.