I have friend who is a real-life metal smith and he order damascus. It's really pretty and stable enough, but it's not by any means, the highest quality of metal.
Even if you add the ceremonial or magical aspects to it, I'm assuming (perhaps wrongly) they weren't +3 weapons or anything, and that they were just used to sacrifice people (maybe they're the path between the mortals soul and the god taking the sacrifice, I don't know)
Anyway, here's the process for Damascus they use nowadays (according to my smithy friend who orders it):
They take two different alloys (the two different colors you see) and smash and fold and twist and curl them together, and basically beat the crap out of it anyway they can (contiuously folding it, so that you see the light/dark pattern of the two metals. The 'spots' come from where they twisted or rolled the pieces, and then smashed and folded them into another piece of metal that's just folded. Imagine the possibilities.