1) Winning the magic duel requiring the Sword skill has "What?" written all over it.
Logically there's no way you should be able to win that fight via pure magic. You have at best been a Lumen for a couple of months. He's a guy plotting to take over the world who has been playing a long game for YEARS, and intentionally set you up to be a weak target before invading your country.
He knows way more about this than you do, and especially about the formal constraints of the duel he's set up (have you found the plot threads about crystal resonances?) Your magic allowing you to create a sword of light is also spelled out in the fluff text when you hit Wield Magic 50. So IMO it's not _that_ out of the blue.
3) There should be more than two outcomes to the naval battle rather than just "you win" and "you lose". It would be extremely satisfying if your high skills or careful preparations could help save at least some lives - better fleet being not crushed entirely but merely forced to retreat, bearing huge\severe casualties.
Fluffing the outcome of the naval battle more descriptively is in my list of things to get to; especially because it'll help people see how close they're getting to having enough strength to win it.
5) Is deciphering entirely useless?
Ciphering is not the most useless skill in the game (my current bet for 'most useless skill' is probably Falcons. It had to be there for meta-reasons, but the only thing it can ever do for you in the entire game you're much, much better off using something else for instead).
However, the only events it comes up in are rare ones, and you only get extra information out of them, so it's really only fun for completionists.
Might at some point add an option to learn a particular bit of actually-useful information via ciphering for people who didn't hire a spy.
6) It'd make lots of sense if you could utilize your Lumen skills for the bandit ambush.
It all happens too fast. If you survive the initial assault you could use your Lumen skills to drive them off, but if you survived the initial assault you don't need to because they get driven off anyway.
7) Is there a non-magic, non-music, non-Godly-naval way of actually winning the game?
Let someone else fight the duel for you.
Or go for the evil ending, if you count that as winning the game.
(We may need to tone down the difficulty of the evil ending, I'm not sure anyone has managed to achieve it yet.)
The athletics skills don't have a lot of uses at the moment (Climbing is in the competition for most useless skill. It does something, but Not Much.), but Polearms actually has more checks on it than Archery does. Polearms, like Falcons, is also required for secret meta-reasons.