I think the problem could be that they are nested to one another.
Before changing anything try to put a sword in the level with the same parameters, and see if it generates events normally.
There’s ways to make it work nested too.
But you should probably just use full collision channels for this. Instead of going with the custom option.
Note that there’s usually no need for both items to block each other:
Item A being set to “item a” and item B having collision checking for “item a” set to overlap or hit should allow you to have Item B check for overlaps or hit events.
So, who is set to block what, depends on who does the checking for blocking.
Also, I just want to make sure you don’t somehow expect the mesh to stop moving through the enemy just because you set collisions. That’s not how they work. I think you know that, but you never know