I am GMing for a group of ex-College friends, who are quite new to role-playing (six month or so), in a custom universe using a lot of characters inspired by Arthurian legends, including the sorcerer Merlin and the sword Excalibur.
The system is home made, based on comp+d20 for rolls, with a strong emphasis on role playing (most actions do not require rolls). The players have to act under some level of uncertainty: they are not fully aware of the consequences of their acts when they accomplish them, but have some knowledge of the legends/stories, giving them hints. I am not looking for system-specific answers.
Merlin will ask the players to retrieve Excalibur1 from the castle Camelot, because he believes the rulers are now corrupt, and are not worthy of the sword any more. However he will not do it himself, since he does not want the inhabitants of the castle to turn against him, and he wants them to feel like they have been punished by God.
The players will be asked to either plant Excalibur into the Rock where Arthur first lifted it or to throw it into the Lake. If they complete the task, they will be worthy and will have a chance to receive the sword from the Lady or to take it again from the Rock. However, they probably will try to steal the sword and keep it for themselves. That would make them unworthy of the sword.
I do not want to players to feel like I cheated them, and I only showed them a great piece of loot to deny them. The group has a strong interest in loot overall.
How can I make it non-frustrating that stealing Excalibur, instead of returning it to the Rock/Lake, will not allow them to use it to its full power, or will even have negative impact on the group's performance?
1: Note that "The players found a fake version of Excalibur" would not work for plot reasons.