This dagger was once used as a ritual weapon by a Yahvinnean death cult. Whenever it hits someone, its evil magic has a [blood magic level of evil dagger]% chance of killing the target outright. This percentage will increase by 1% when the dagger is fed.
Even if you put a lot of blood into the evil dagger, it wil remain a very unreliable weapon. While its potential benefits are huge (you might be able to kill even the toughest foe with a single blow), the probability of this happening is always small. On the negative side, this means you cannot build a reliable strategy around the evil dagger. On the possitive side, the evil dagger is an excellent item to use in what would otherwise be hopeless situations -- it is a gamble, but if you've got nothing to lose, a gamble is better than nothing. Also, the evil dagger is strictly better than a standard dagger.
If you don't want to kill your enemy (for instance, if you want to soften up a high-evel enemy before sacrificing your current powers), you shouldn't use the evil dagger.