1- There are several ways to do melee weapons. You can use overlap events for the sword if you just want to inflict damage regardless of where you hit, or you can use line trace if you want to get the specific bone of an enemy you hit.
2- Having a collision box is just fine(you actually need a collision box to generate overlap events if you need) but you would want to set the box’s collision preset at overlap instead of block in order to prevent this kind of issues.