As is implied in the article mentioned later on, there is likely some truth to this "fairytale." Shorinjin literally translates to "Man of Shaolin." This implies the art and its remarkably smooth and flowing movements probably have a Chinese origin. The origin of the Tengu sword indicates that it was indeed developed by farmers. It is two-thirds handle, made of wood, and one-third blade, double-edged, but maintains the structural curve of the katana. The double-edged blade can cut from any angle. A wooden sheath covers the blade so that the unpolished wood looks more like a stick. It could be carried by farmers without alarming a soldier. Because it is two-thirds wood it is much lighter than a katana. The long handle allows it to be used like a small staff or jo, striking without cutting. It is a spinning sword with the balance point in the middle so that it can be easily shifted from hand to hand. This allows the weapon to be spun like a rotating fan, which has three advantages. First, it is faster due to inertia--"an object in motion tends to stay in motion"--the blade is always on its way to the target (it becomes a disc). Second, the blade becomes invisible because there is no way to determine the plane or direction of attack. Third, it presents an "animal" unknown to the enemy; he has no reference points from which to figure out what he is confronting--it captures the mind. The sheath, only thirteen inches long, can be used as a yawara stick or it can be thrown. Because of its center balance point, the sword can be thrown like a horizontally rotating fan or a spear. It was a weapon for all contingencies--not the user's "soul."2
For more on Saito Ninjitsu, see the article here written by Shannon Kawika Phelps, the only person outside the Saito family to receive a 10th Dan in the art, also headmaster of the Temple of the Full Autumn Moon.
1 GIFT OF THE SHORINJIN by Shannon Kawika Phelps -- Referenced Above