Bandit LOAF
Long Live the Confederation!
We see the knife when Paladin opens it on the diligent though... The angles of the shots could also alter how the knife is perceived in action too I suppose. But my impression (unrelated to how it would look in a fight) is that the knife was never really a combat weapon and more ceremonial in nature.
The blade is certainly ceremonial (the Confed Handbook explains it, IIRC) -- but this is what I was trying to say initially... the movie includes things like Paladin's opening the knife early on specificaly *because* it's going to be used later in the knife fight. Otherwise it doesn't really make any internal sense... it's like telling you the Morningstar has a Mace and then never giving you anything big to blow up.
Gerald is also considerably older than Blair. It's not entirely surprising that he would get the better of Gerald even if Gerald's knife was bigger.
He's considerably tougher looking, too, though - I can't imagine She's All That beating up the captain of Das Boot.