I was setting up my OBS but then I realized you can get the sword pencil after the beginning cutscene . It is illegal if I use the sword pencil early before Chapter 7 ?

Yes, you can get the sword, but it's not recommended in 'Any% Bad Ending' or in any misc. categories because the time you expend getting the sword is very big, bigger than the time you expend getting the sword in chapter 7. Getting the sword after the beginning cutscene only actually save time on 'Any% Good Ending' and '100%' runs, because you can get an puzzle piece in chapter 3 much faster and easier, and in case of '100%' runs, get an color buddy at the very beginning of chapter 7 more faster. In general, yes, you can get the sword.