#Nothing happens to the sword

When you use Illusory reality, the thing you affect ceases to be an illusion and thus will not work with Malleable Illusion.

Illusory Reality says:

When you cast an illusion spell of 1st level or higher, you can choose one inanimate, nonmagical object that is part of the illusion and make that object real.

###The spell effect takes an illusion and makes it real

The spell text states that the object you choose starts as an illusory object but then becomes a real object. The way it is phrased and the way they are explicitly contrasted in the sentence make it clear that the object is not now illusory and real, just real.

More evidence that Illusory Reality creates real things and not some partially real thing that can be interacted with by illusions is this conversation by Jeremy Crawford:

@BrailSays: lvl 14 illusory reality+illusion of adamantine wall, incoming siege boulder/ballista. What happens?

@JeremyECrawford: It could hit the wall.

@BrailSays: wall hp? no damage ?

@JeremyECrawford: The wall is real, so the DM would treat it like any other wall.

No illusory object can stop or take damage from a projectile without explicitly saying so in its spell effect. This new, non-illusory wall has HP and AC and all the other properties of a real wall because it is real. It has none of the properties of an illusion because it is no longer one.

###Plain English: "real" is mutually exclusive with "illusion"/"illusory"

D&D often depends on using the plain english meaning of words. Neither illusion or "real" have any concrete game definition.

Illusion is defined as "something that deceives by producing a false or misleading impression of reality.". And illusory is defined as "based on illusion; not real."

Real is defined as "being an actual thing; having objective existence; not imaginary".

Thus, it is apparent that something cannot be illusory and real simultaneously.

###Conclusion

So, when you use Illusory Reality to turn part of an illusion into an object, it is no longer an illusion. It is a real thing. Thus, you will not be able to apply Malleable Illusion to it because Malleable Illusion only works on illusions and not objects.

To apply this to an example you used: the sword you made started as an illusion and then became a real sword. Unfortunately, Malleable Illusion does not work on real swords. It doesn't work on the one the barbarian bought in a shop and it doesn't work on the one that was formerly an illusion. Unfortunately, you'll just have to wait until Christmas to get your coal ;-).

Nothing happens to the sword

When you use Illusory reality, the thing you affect ceases to be an illusion and thus will not work with Malleable Illusion.

Illusory Reality says:

When you cast an illusion spell of 1st level or higher, you can choose one inanimate, nonmagical object that is part of the illusion and make that object real.

The spell effect takes an illusion and makes it real

The spell text states that the object you choose starts as an illusory object but then becomes a real object. The way it is phrased and the way they are explicitly contrasted in the sentence make it clear that the object is not now illusory and real, just real.

More evidence that Illusory Reality creates real things and not some partially real thing that can be interacted with by illusions is this conversation by Jeremy Crawford:

@BrailSays: lvl 14 illusory reality+illusion of adamantine wall, incoming siege boulder/ballista. What happens?

@JeremyECrawford: It could hit the wall.

@BrailSays: wall hp? no damage ?

@JeremyECrawford: The wall is real, so the DM would treat it like any other wall.

No illusory object can stop or take damage from a projectile without explicitly saying so in its spell effect. This new, non-illusory wall has HP and AC and all the other properties of a real wall because it is real. It has none of the properties of an illusion because it is no longer one.

Plain English: "real" is mutually exclusive with "illusion"/"illusory"

D&D often depends on using the plain english meaning of words. Neither illusion or "real" have any concrete game definition.

Illusion is defined as "something that deceives by producing a false or misleading impression of reality.". And illusory is defined as "based on illusion; not real."

Real is defined as "being an actual thing; having objective existence; not imaginary".

Thus, it is apparent that something cannot be illusory and real simultaneously.

Conclusion

So, when you use Illusory Reality to turn part of an illusion into an object, it is no longer an illusion. It is a real thing. Thus, you will not be able to apply Malleable Illusion to it because Malleable Illusion only works on illusions and not objects.

To apply this to an example you used: the sword you made started as an illusion and then became a real sword. Unfortunately, Malleable Illusion does not work on real swords. It doesn't work on the one the barbarian bought in a shop and it doesn't work on the one that was formerly an illusion. Unfortunately, you'll just have to wait until Christmas to get your coal ;-).

#Nothing happens to the sword

When you use Illusory reality, the thing you affect ceases to be an illusion and thus will not work with Malleable Illusion.

Illusory Reality says:

When you cast an illusion spell of 1st level or higher, you can choose one inanimate, nonmagical object that is part of the illusion and make that object real.

###The spell effect takes an illusion and makes it real

The spell text states that the object you choose starts as an illusory object but then becomes a real object. The way it is phrased and the way they are explicitly contrasted in the sentence make it clear that the object is not now illusory and real, just real.

More evidence that Illusory Reality creates real things and not some partially real thing that can be interacted with by illusions is this conversation by Jeremy Crawford:

@BrailSays: lvl 14 illusory reality+illusion of adamantine wall, incoming siege boulder/ballista. What happens?

@JeremyECrawford: It could hit the wall.

@BrailSays: wall hp? no damage ?

@JeremyECrawford: The wall is real, so the DM would treat it like any other wall.

No illusory object can stop or take damage from a projectile without explicitly saying so in its spell effect. This new, non-illusory wall has HP and AC and all the other properties of a real wall because it is real. It has none of the properties of an illusion because it is no longer one.

###Plain English: "real" is mutually exclusive with "illusion"/"illusory"

D&D often depends on using the plain english meaning of words. Neither illusion or "real" have any concrete game definition.

[Illusion][1] is defined as "something that deceives by producing a false or misleading impression of reality.". And [illusory][2] is defined as "based on illusion; not real."

[Real][3] is defined as "being an actual thing; having objective existence; not imaginary".

Thus, it is apparent that something cannot be illusory and real simultaneously.

###Conclusion

So, when you use Illusory Reality to turn part of an illusion into an object, it is no longer an illusion. It is a real thing. Thus, you will not be able to apply Malleable Illusion to it because Malleable Illusion only works on illusions and not objects.

To apply this to an example you used: the sword you made started as an illusion and then became a real sword. Unfortunately, Malleable Illusion does not work on real swords. It doesn't work on the one the barbarian bought in a shop and it doesn't work on the one that was formerly an illusion. Unfortunately, you'll just have to wait until Christmas to get your coal ;-).

#Nothing happens to the sword

When you use Illusory reality, the thing you affect ceases to be an illusion and thus will not work with Malleable Illusion.

Illusory Reality says:

When you cast an illusion spell of 1st level or higher, you can choose one inanimate, nonmagical object that is part of the illusion and make that object real.

###The spell effect takes an illusion and makes it real

The spell text states that the object you choose starts as an illusory object but then becomes a real object. The way it is phrased and the way they are explicitly contrasted in the sentence make it clear that the object is not now illusory and real, just real.

More evidence that Illusory Reality creates real things and not some partially real thing that can be interacted with by illusions is this conversation by Jeremy Crawford:

@BrailSays: lvl 14 illusory reality+illusion of adamantine wall, incoming siege boulder/ballista. What happens?

@JeremyECrawford: It could hit the wall.

@BrailSays: wall hp? no damage ?

@JeremyECrawford: The wall is real, so the DM would treat it like any other wall.

No illusory object can stop or take damage from a projectile without explicitly saying so in its spell effect. This new, non-illusory wall has HP and AC and all the other properties of a real wall because it is real. It has none of the properties of an illusion because it is no longer one.

###Plain English: "real" is mutually exclusive with "illusion"/"illusory"

D&D often depends on using the plain english meaning of words. Neither illusion or "real" have any concrete game definition.

Illusion is defined as "something that deceives by producing a false or misleading impression of reality.". And illusory is defined as "based on illusion; not real."

Real is defined as "being an actual thing; having objective existence; not imaginary".

Thus, it is apparent that something cannot be illusory and real simultaneously.

###Conclusion

So, when you use Illusory Reality to turn part of an illusion into an object, it is no longer an illusion. It is a real thing. Thus, you will not be able to apply Malleable Illusion to it because Malleable Illusion only works on illusions and not objects.

To apply this to an example you used: the sword you made started as an illusion and then became a real sword. Unfortunately, Malleable Illusion does not work on real swords. It doesn't work on the one the barbarian bought in a shop and it doesn't work on the one that was formerly an illusion. Unfortunately, you'll just have to wait until Christmas to get your coal ;-).