The Handguard And The Sword

When you go to the Dojo and Ryo has the sword in his hand and the handguard in his inventory, you can make him try to fit the latter over the blade. However, he quickly realizes that it doesn't fit.

Is it not from the sword after all? Is the katana that Iwao uses in the flashback a different one?

The answer is that Ryo is just doing it wrong. The handguard isn't meant to just slip over the blade.
If you think about it, that doesn't make any sense for combat anyway. It could very easily be pulled apart by an opponent or potentially even fly off in the heat of the battle, if it sits there all loose.

As you can tell from this exploded diagram of a Katana (picture taken from Oriental-Weaponry.co.uk), the handguard is meant to sit firmly secured between a lip at the lower end of the blade and the grip. So the slit in the handguard is sized accordingly to that and thus a bit smaller than the widest part of the blade. A full disassembly of the grip is necessary to get the handguard out.

Did the developers not know better or was it just Ryo who was uninformed?
Since he has memories of his father performing skilled actions with this sword it would be natural to assume that Iwao teached Ryo at least the basics of how to handle and maintain a katana. Then again, Ryo seems to be rather uninformed in anything but martial arts, not even recognizing his own family crest.

My guess is they were using this easy to miss scene as a hint for players that can't figure out what to do, giving a clear message that the sword and the handguard do not go together and thus have to go somewhere else.