I am low level but did a bit more testing. I get this glitch no matter what race I play and whether I have a dagger, staff, or club equipped.
It looks like what is happening is the attack animation doesn't shut off while the spell is being cast and during spells with long cast times the character goes into a weapon twirl as he would if he were under attack and just standing there. The weapon will flash in the character's hands for a second causing the anomoly. I experience it in both xp and vista and with two different video cards.
I haven't tried a wand or focus item yet.
To fix it I tried a bunch of different macros but none of them worked. There are /commands to set your wield preference...it would be nice if there was one to force wield preference 0 which would be weapon sheathed.
Not a huge deal but I know it really turned me off last year when I played on a buddy pass...it just looks bush league for a two year old mmo. This game is fantastic. I really believe the core gameplay is better than anything out there right now. It would be nice if they could polish out these little things because so many people seem to be giving the trial a go.