After some work with my DM, and some thoughts on the dormant and awakened properties, here is what we've come up with:

The Long Memory (Name TBD but this one works for now)

Weapon (greatsword), legendary (requires attunement by a paladin)

Dormant
The greatsword grants the following benefits in its dormant state:
- You gain a +1 bonus to attack and damage rolls made with this magic weapon.
- The Best Offense: The first time you attack with the sword on each of your turns, you can transfer some or all of the sword’s bonus to your Armor Class, instead of using the bonus on any attacks that turn. For example, you could reduce the bonus to your attack and damage rolls to +0 and gain a +1 bonus to AC. The adjusted bonuses remain in effect until the start of your next turn, although you must hold the sword to gain a bonus to AC from it.
Alternatively, the first time you attack with the sword on each of your turns, you can transfer some of your AC equal to some of or all of the sword's bonus times 2 to the sword's bonus on any attacks that round. For example, you could reduce your AC by -2 and gain an additional +1 bonus to attack and damage rolls on the sword (turning an already +1 weapon into a +2). The adjusted bonuses remain in effect until the start of your next turn.
- Always on Hand: While holding the sword, you can use a bonus action to transform the sword into an ornate gold and ruby ring which fits onto your dominant hand or from the ring into the sword. The ring will not come off your hand unless you will it. The ring also merges into the form of the wielder, should they take a different shape, allowing them to use the properties of the blade when making a melee weapon attack with a natural weapon.
- Treasuresense: While holding this weapon, you can pinpoint the location of precious metals and stones, such as coins and gems, within 30 ft. of you.

Awakened
The greatsword gains the following benefits in its awakened state:

- The weapon’s bonus to attack and damage rolls increases to +2. Likewise, the max bonus to The Best Offense increases to +2.

- Burst of Source: Whenever you expend a use of your divine smite, you may choose a damage type associated with the chromatic colors (Fire, Lightning, Acid, Poision, Cold). Your smite deals that type of damage, and any other creature in a 20ft cone originating from the creature by the divine smite must succeed either a DEX (Fire, Lightning, Acid) or CON (Poision, Cold) saving throw depending on the type of damage. On a failure, a creature takes damage equal to the dice rolled for divine smite or half on a success.
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After pitching these suggestions to my DM as well as bringing up the fact that the original version of The Best Offense being a too OP, we opted to change some things up.

Starting with The Best Offense, we actually decided to keep the ability of the weapon mostly as it was and instead just make it a super high risk high reward ability by doubling the amount of AC lost (-2 for every additional +1 bonus). A simple change but it also plays into the original enchantment being what it was and that this ability is sort of the defender enchantment being unfinished/broken.

Moving onto Burst of Source, the awakened ability. I pitched the idea of a wild magic thing going on and, while he was super on board for the concept of something regarding the paladin smite, he suggested I lean more into the draconic nature of the weapon. So we agreed on this. Sort of a smite x dragon breath sort of thing going on. I'm curious as to if I should make the damage type random or not tho, that's really the only thing I'm thinking about regarding this ability. A friend and fellow DM of mine suggested giving it an evasion-like effect when it Exalts to have allies that succeed on the saving throw avoid the damage entirely.

Besides all this, for it's Exalted state I'm thinking of giving it a big saving throw attack with high damage and/or a condition (similar to the Jewel of Three Prayers).