I have the 70k for a weapon upgrade but i have to choose between a 1h sword or a 2h sword. I don't really care about def and if this was WoW i'd pick the 2h right away but i'm not sure if giving up the shield will give me more dmg in this game. Any input is appreciated.
the shield only "engages" with a chance. sometimes you block, other times you dont. but you almost never evade. loosing it boosts your evasion. now, nobody in the lvl 1-20 range has evasion boosting passive skills, nor shield "masteries" acquired later in the game which boost the frequency of your shield blocking technique so using a shield when under lvl 20 is pretty useless. if you can'T afford your new weapon, loose the shield and use the money from it to fund part of your new weapon acquisition.
I don't quite follow everything Spud is saying, although I do understand the evasion bit. However, I tend to agree with Spud. I assume you're in ng (lower than level 20). At that level, there's no real reason to get a 2h sword, other than looks. You don't get any real masteries for it unless you're an Orc Fighter, and even then, I think the 2h weapon mastery comes when you go Raider. Also, a 2h sword is slower. It's extra attack power would save you some shots, but you can get quite a few ng shots from quests, so this doesn't buy you that much. Finally, we come to what I think is the real heart of the matter:
Don't overspend on weapon upgrades when you're below level 20. You'll hit 20 soon enough, and you're going to need money to upgrade to a D grade weapon sometime thereafter. As Spud said, stick with a 1h weapon (or fists) and don't get the shield. Just use newbie buffs and hunt mobs you can kill fairly quick and still get decent drops. And check out the Player's Guide sections for how to make money in L2.
In all honesty, what no-grade weapon you use is pretty much up to you. This is one grade that you can go with what you think looks best, because there is so little damage output difference between them. So long as you stick with fighter weapons for fighters or mage weapons for nukers.
Once you hit level 20+ and your masteries start coming in, though, you're usually better off using the weapon type you have a mastery with. For example, knights who have sword-blunt mastery are usually better off using a sword, while monks who get fist mastery are better off using two-handed fists.
It makes so little difference that I think you should go with whichever seems more fun/better looking.
The 2h swords, some people swear by them because of the slow big hits. You use fewer soul shots, have some big crits.
The shield doesn't totally suck, especially depending on what your race/class is. If you're playin a dark elf, orc or a mystic, it's not like you were gonna evade attacks regardless, so why not carry whatever shield you've found, at least thru the NG levels.