There is NO way a 5mW pointer is brighter than whatever LED they've got in there already.
The LED lit saber, does not have a costant light diffusion above all the surface of the sword, you clearly notice a brighter part in the beginning, and the end of the blade with less light.
Even if the effect is nice, it is not memorable.
The problem is that the focus control on Led is much less precise than on Laser.
With the Laser ad the right focus, the first beam covers the 50% of the sword, the reflection on the top mirror at the end of the blade, covers the rest of 50%. And you get a costand light density above all the blade, and the effect is a wonder.
Also the Laser is brighter than several standard Led, but of course you cant compare a brighness a $5 Laser diode with a $100 Luxeon K2 ! (but you can get a better costant light effect with the first)
I suppose, as you said, a laser with more mw can be used, but i would not exceed to avoid overheating and damage. That safety limit i put on the guide, for my personal test, but everyone can experiment what he wants. Anyway i got extremely bright effects with just 10mw green and felt no need of superior light.
Of course the best effects are in night or dark rooms.