<winging...>
Taking the plunge is *good*! =)
1. This is exactly what you need to provide, a hilt piece with invisible mesh. I'm not sure what CEP pieces you looked at, but try this approach; Take a standard sword hilt you know displays and in the ascii file locate the mesh node(s). On them, find the "alpha 1.0" line (search and replace is best ;-) and change it to "alpha 0". Viola! Instant invisible hilt. Rename into a new part piece and you should have the affect you need.(follow the naming convention as outlined in the Custom Content Guide...)
2. I believe the effect you're talking about is the plc_i06 (which has no particle rotation and does not inherit local) You might muck about with the fx_flame01 model instead which does inherit local. Try giving it a particle rotation (slow, for a swirl). You might also try changing the render type and experiment.
Additionally, you might look for a better sprite atlas of a much larger scale flame, . as the fxpa_flame00 is so obviously a small flame. That is the tga collection of images the particle steps through in animation.
Edit: I *think* effect export is still a bit buggy in NwMax, though MDA can correct me if I've just fallen behind. Generally, I tweak effects in the ascii model after I get everything else set in Max.
I'll be interested in your progress ;-)
<...it>