Shortly after you find Locke and get him to rejoin the party you get presented with a choice... Get the magicite for the esper Ragnarok or have a crazy blacksmith forge it into a sword which is also named Ragnarok. If memory serves I generally take the esper. I like learning all the spells and such and have typically been happy just using the atma weapon. This time around I have three people who are attacking with swords and decided pretty much on a whim to go with the sword this time around. Holy cow, is it strong! It's doing more than double the damage of the atma weapon and sometimes casts flare! The only downside is it seems to drain mana in order to do this extra damage. Oh well, Locke doesn't want to cast spells anyway!
I figured I should look into exactly what you're giving up when you make each choice. Mostly to sate my curiousity but a little for the next time I play the game!
The Ragnarok esper has no level up bonus so there's no need to worry about missing something there. It is the only esper in the game which teaches the most powerful spell: Ultima. Not having access to Ultima is a big downer and I'm pretty sure that's why I normally take the esper. On the other hand there is a hard to get shield which also teaches Ultima so you're not throwing it away completely if you take the sword. You're just delaying picking up Ultima for hundreds of fights. The last thing the esper does is lets you morph enemies into all kinds of items. This morph spell is the only way to get extra copies of a few powerful items. You don't really need extra copies of them, and you can have a really low chance to get them anyway by using magicite consumables and hoping you hit Ragnarok. I don't think I ever used the esper to morph things so if I'm missing a lot by not having it I wouldn't know!
The Ragnarok sword is the second best weapon in the game. The best weapon, Illumina, can only be obtained by betting the Ragnarok sword in the arena. It's stupid good. +7 to all stats. 50% evade and magic evade. Can't miss. Auto-crit. Can be used from the back row. Can cast pearl, which also auto-crits. Maximum attack power. I don't think I've ever had one of these... Tomorrow on the bus I plan on going to get one. Locke is going to be even more awesome than usual!