This method has been used by me and a group of friends for some time now. Note that it does not simulate realistic sword combat, but it is even more fun than being locked in a kennel in Ronald Reagan's basement.

Equipment - 28-35 mm diameter wooden dowels of the appropriate lengths (see below), hard or soft insular foam tubes (plumbing section of your local hardware store/make sure it fits on the dowel!), duct tape (never skimp).
Tools - Wood saw, scissors, pencil, some time away from E2 (yipe! Don't worry, it will be worth it)

Step I: Mark and cut the dowels to the appropriate lengths; mark the length of the hilt. Be careful not to cut any short people that may be standing around. The following is a basic list of lengths we use for swords:
Short Sword   Katana     Longsword    Bastard   Claymore
75(18)        102(27)    130(32)      140(35)   160(42)

(figures in cm) The numbers in parenthesis are the hilt lengths, and the numbers outside are overall lengths. Also, the lengths are _not_ historically accurate, but they represent my experience the lengths which help produce the most enjoyment.

Step II: Cut appropriate lengths of foam tubing for the blade sizes (overall size - hilt size). Slip the tubing on, and tape it down using duct tape (use a lot of tape, make sure it is securely fastened!). Cut about 1-2 inch length of foam for the bottom of the hilt and tape it on also.

Step III: Cut the tubing in two so that you get a nice, 3-inch long strips of foam. Place the strips over the tip of the sword and over the bottom of the hilt, and tape them on.

Thats basically it! If you want more life out of your tubing, cover the whole thing in duct tape so that the blows won't cut through the foam. Remember: Always fight one another in a safe manner and, if you intend to poke someone's eye out, make sure he has health insurance first.