The Yo-yo may actually be the best weapon Usagi could have chosen : had he taken a sword he would never have tried to talk to the yokai as the big sword would make him want to jump into action and ask questions later even moreso than his regular sword. The yo-yo has the ability to capture Yokai, so it helps him to neutralize them without risking to maim an innocent one.
beside, he would have stopped to use the sword his aunt gave him if he had got a bigger sword in the armory.
In episode 3, the first time he captures a Yokai, it begs him to not use the might of the yo-yo. Which begs the question - what else can it do besides capture? This suggests that it has some secondary ability (as do possibly the other Kaikishi weapons).
How did the Mogura end up as "third-rate" street thugs unlike the Neko ninja and Komori clan? It's possible that because of urbanization as the beton, tar and other elements composing the modern city of Neo Edo made it impossible for moles to dig underground and attack their targets by surprise. The only places where it could work are small villages where urbanization hasn't spread yet (like Auntie's farmhouse, but bigger), but the other problem is that either the clients can't pay much or have too little importance.
Unlike them, The Komori (the Bat Squadron) still have an advantage as they can freely fly in the sky while it became easier for the Neko ninjas to hide thanks to the batiments and infrastructures in a big city but an efficient police force and new technologies made their job more difficult.
Of course the leader of the bats made fun of Chikabuma for selling his sword to Usagi: the blade is considered as the soul of the samurai in real-world Edo era, so it might have looked like Chikabuma lost his pride.
For anyone who read the comics, remember that Jei is an immortal spirit who possesses people and has a grudge towards Miyamoto Usagi and considered his allies as guilty so not only he may have been among the released Yokai but even worse : he could go after Usagi or Auntie and given his skills none of them stand a chance against him.
Not all yokai are evil but if you think about it : Usagi released every yokai and one evil Yokai is enough to destroy a village, Usagi may have caused the deaths of hundreds of innocents.
Miyamoto Usagi was accused of killing the shogun, no matter the circumstances, it is punishable by death and given the fact Yuichi Usagi is trying to clear his name he may have been sentenced to death. The series alludes as much with the 1st and 2nd season flashbacks and Usagi meeting his ancestor face-to-face through meditation in season 2.
And even if he has descendants, it should not be forgotten that in the comicbook itself, he already had a son before the crime and even if he gave a memento he could have done it before committing seppuku as it would be the only way to spare his descendant from retaliation.
