And there we have it. 300% of staff dps isn't a lot of damage afterall.
Always wary of abilities that sound too good to be true, because they usually are.
I think the key to understanding the smaller numbers is that spell/spirit damage from the blade is going to deduct directly from hit points unless the enemy resists that specific element, while physical damage is always going to be mitigated by armor. If an enemy's got 400 armor, then a dagger attack that reads on paper like it'll hit for 300% of 150 will do something like 100~. In the mean time, they've got no spirit resistance and our Spirit Blade reads like it's going to hit them for 160 and you know what? It actually DOES hit them for 160~ every time.
If Spirit Blade is terrible at dealing damage at 300/500/700% per swing, pretty much every spell in the game Mages can access are terrible at dealing damage.
Examples: Blizzard (75% weapon damage per second), Chain Lightning (300% weapon damage), Lightning Bolt (200% weapon damage), Energy Barrage (66% weapon damage x12, but those 12 take some time to fire off), Flashfire (300% weapon damage), Immolate (300% Weapon Damage + 75% per second for 8 seconds)
Now, all of these have much higher mana costs + cooldowns. They also have various animations that will effect just how efficient they actually are at dealing damage quickly compared to the simple swipe of a sword, which could also be a factor.
But the fact that the blade deals 700% damage to guard every hit means it will be by far the most efficient and heaviest damage dealing tool a Mage could have in their arsenal to tear it down.
The low staff damage concerns would not be a spec problem, but a class-wide concern. If staff damage is too low, it will be the Mage class as a whole to underperform compared to Rogues and Warriors. But Knight Enchanter remains one of the better ways to bring out that damage potential.