I would suggest keeping the ability to draw and sheathe your weapon (with no delay). I would also suggest a system where any non combative spells or abilities could be used without drawing your weapon, and any combative spells or abilities could be used but will automatically draw your weapon.

I guess in reality the active/passive mode is already fairly close to this, all they would have to do is remove the delay between drawing your weapon, and allow abilities to be used when your weapon is sheathed.