I like the justification myself, but it requires a LOT of wankery. Dwarves supposedly smelt it and melt it down, unless they just claim that to keep everyone else in the dark. If it's not completely amorphous - which we know it isn't - I'm not sure we can give it a (much!) finer edge than obsidian without taking advantage of physics while it's in the shower. 'Doesn't flex or deform before it snaps' also makes the concept of it having fibres that can be worked very problematic, and clothes made out of such a material would be rather impractical.
But justification aside... toying around with material entries more extreme than the standard metals but less so than adamantine have extremely interesting effects.
For example, my downgraded adamantine (codenamed 'clownite'; same impact strength, density of aluminium, a few properties of tungsten, very sharp but still believable edge) has some very interesting properties. It makes good blunt weapons against naked flesh or against itself because it's hard and tough, but against softer armour a denser material is better. Makes perfect sense - against hard armour some of the force will be absorbed if the weapon is soft, if the armour is equally soft this will happen anyway and a bigger impact from a heavier weapon will matter more. I don't know if the possibility of armour being pushed into tissue is simulated yet.
Buffed-up obsidian (material values cribbed from various igneous stones rather than the marble it uses by default, increased edge because when steel is 10k and 100k goes as the maximum imaginable, I believe obsidian should rank higher) is very very deadly against unarmored opponents but not tough enough to defeat even low-quality armour.
In short, the combat/material system is sheer brilliance, and I'd prefer fictional materials that show it off.