interesting, but I have a feeling people will be commenting on this.
My saying: I don't think YG has reached no sword defeats sword level. Reason? Well, you're saying that when he is depressed, his palm is superior to the sword. Personally, I think you are correct on that. It's true that palm>sword, but the reason is not because he has reached the final stage. IMO, I think Demonic itself is a type of internal because all the Greats describe his internal as Extreme Yang Meng. This extreme in Yang is probably only rivaled by XF (I think YG's is actually even more meng). All the internals he has learned in the past don't match with this. Jade Maiden is more toward the Cold Yin side. All the QZ and 9 Yin talk about a balance of Yin/Yang. Nothing in his old arsenal matches with the extreme yang meng internal he has. Therefore I think Demonic itself may be a type of internal. All those Waves and Sea helps increase the speed of increase in internal. Well, Melancholic Sad Palm is said to have 2 main basis. 1. Strong internal energy 2. Mood. The 1 is the internal he gets from Demonic internal (assuming what I said was correct). Therefore, without the depression, this regular mode should tell what level he trully is at. The 2 is like an booster. The more depressed, the higher the boost in palm power. This means the true power that YG should have come from 1. His power just based off of 1 should be weaker than the sword(well, that can be presumed from the fact that he was looking for a sword during the fight with JLFW). Though he would surpass with depression, but depression isn't part of internal training. YG just... invented this palm, it's not like his sword level actually increases just because he is depressed. Mood should not have anything to do with the actual swordmanship. I personally think YG's level in sword is either "half" of wood stage or wood stage. With "half" more likely.