I can't see anything wrong with that, unless GM7 changed so you have to do instance_create() before instance_delete(), but I doubt that.
Maybe please post a version of your .gmk that only has this part so we can take a look, it could be something else causing it.
Just FYI, you can move all the code from Step to Create, because you only need to set the sprite once since Link can't turn while swinging. Also the global.facing="whatever" underneath each sprite code is useless & not needed.