I'm not so sure it was Sauron who made the morgul blades. The name implies they come from the Morgul Vale, which is inhabited by the Nazgul. And the leader among the Nazgul was the Witch-King, a necromancer prior to falling sway to Sauron. So to my thinking it's the Witch-King who came up with the morgul blades, perhaps with Sauron's help. After all, the Black Numenoreans who served Sauron had sorcerers among their numbers, so who's to say all "magical" items of evil use by Sauron's forces were created by Sauron alone, when he clearly had help among his followers/slaves to do this for him.
Rumil brings up a point about the Witch-King sending the wights to the Barrow Downs. If wights and lesser wraiths are the same thing, it is feasible that said wights came into being courtesy of a morgul blade.
So why wasn't their use more prolific? Well, since this is all conjecture anyway, there was already a small army of wraiths waiting to be called into service at the Barrow Downs. Not very useful against Gondor in terms of distance, but had Arnor still been around (and able to threaten Sauron's plans), he could just turn the wraiths loose, so to speak. Which would have been a thorn in the North Kingdom's side, helping to hamper any aid to Gondor. So any left over morgul blades would've been convenient tools, but not a weapon of immediate need for the Nazgul.
Elrond certainly recognized a morgul blade which means he had seen them before. And seems to have known how to treat those wounded by them, in Frodo's case. Which can imply their use had once been more prolific.
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