TheBigChief: The whetstones are from the Ultimate Swordsman's Suit DLC (Amazon.com pre-order bonus), which is where I ordered the game from. I should have known. First it is a suit that is not actually a suit, but rather some enhancements, and now we know it doesn't work at all.
I'm kind of glad to know it is not only the DLC stuff that has a problem with silver swords, but I'm also a little pissed that I have been wasting my time using oils on my sword.
I guess it is just more outsourcing problems. This time it is the beta testers, or lack thereof.
This game is great, but it could have been better.
Whetstones work fine on steel swords. It's just that it doesn't work (and oils don't work) on silver sword. So I would say it is not a DLC problem seeing that oils are available in the vanilla game.