In Source 3 under Weapon Size there is information on that. I think the general rule is if you are a small creature a medium sized weapon must be able and wielded in the two-handed fashion. Looks like a -2 to the attack roll may be another speed bump for that path.
Edited: Oliron on 9th Mar, 2010 - 4:33pm
I don't see why a slightly smaller weapon would do less damage as long as it's wielded the correct way, but, that's just how it is I suppose.
That's too bad. I would think a shortsword would be usable one-handed for a halfing, but a longsword would probably be too end-heavy for the Halfling's low leverage, to use without some difficulty, unless two-handed. I can't find any rules that indicate otherwise, that a halfling with a katana has to essentially use it like a two-handed sword - though I wonder how a no-dachi would be represented.
I guess if you considered it's a halfling from the Asian-like area, the shortsword would be the halfling sized katana, and uh, what, a dagger or punching dagger or something might be the wakizashi, if that's what you're going for, at lease theme-wise. I still think it's a cool concept, whatever the mechanical stats for it.
Yes that is unfortunate though a halfling is the size of a young child and weapons are heavy. If you use a medium sized weapon and take weapon focus you could have only a -1 to the attack roll. Get a +1 weapon and your good, but you can't use a shield so.
Also I think the reduced damage may reflect the fact that a smaller person cannot give as much force with a smaller weapon, or along that line of thought. If you have a smaller weapon and are hitting a larger target it will generally do less to the larger target. Than if that larger target used that same weapon on you the smaller target.
Edited: Oliron on 9th Mar, 2010 - 10:17pm
I am just giving background stuff so the players have something to go on. This way you guys are not just sitting around like, what do we do. Were you asking who was coming in and out because you were looking for the others?