Spirit Sword's purpose isn't to do damage, even though it does plenty of that. It's purpose is to decrease your higher damage spell's cooldowns even further through the passive "clean burn." These abilities usually include fire mine, static cage and fade cloak.
Because Spirit Sword, Combat Clarity and Fade Cloak only work at close range and they're essential for maximizing your damage, any nuker build is at melee range spamming spirit sword, fade cloak and fade step in between your larger damage abilities.
But yes, people have thought of using chaotic focus and fade shield. In fact it's standard on most builds. Chaotic focus costs barrier to use, which is immediately regained when your fire spell goes off.
I want to understand this fascination that people have with playing the knight enchanter at range, when all of it's abilities only work at close range. Why not play just another specialization, both the Necromancer and the Rift Mage are more in line with standard mage behavior if you're interested in that.
For example on my KE I run
Spirit Sword - Fade Cloak - Fade Step - Fire Mine - Dispel - Static Cage - Energy Barrage - Mark of the Rift
Sure I use Spirit Sword. It's the hallmark of the class. But I only use it in between casting Energy Barrage, Fire Mine and Static Cage.