This story is a beautiful reflection on the irony of scholarship attempting to express itself through a medium (speech/language), which contains within itself a contradiction of the very fundamental ideals which it proposes to expound. In this particular case Manjushri identifies this sublime and intrinsic inconsistency. An exalted individual may wax eloquent upon the virtues of non-duality and his grasp of this abstract concept, but the very language used to expresses these views is inherently dual as it is composed of word and it's meaning, two exclusive entities. This subtle, nonetheless significant gradation brings home a profound truth taking the wind out of any sense of achievement derived out of purported scholarship. Verily thus Manjushri carries in his two hands a book and a sword.
This sword is there to cut of fetters born not out of ignorance but those which arise through knowledge, signified by the book. This is not a negation of bookish knowledge, but only an assertion of the realization that unless we gain it we cannot know the futility of it in the quest towards ultimate spiritual truths. Manjushri appropriately suggests not the path of renunciation but that of righteous karma.