I don't endorse violence so how can I let them playact it?
I am known to over react (just ask my husband), should I just let him act out this fantasy bad guy thing and open up discussions about fighting, bad guys etc OR should I just leave it alone since he obviously knows he's not acting like a "good" guy with the sword. Again, I have to stress, I do not endorse any fighting/violence at anytime.
I'd let it be. It's a totally natural thing to want to feel more powerful than the scary world. Preventing him from acting it out doesn't make the need go away. It just drives it inward out of your sight so that he acts like the peaceful person you want him to be.
I think the best way to pass on our values is by living them, not by making someone else live them. Let him be who he is and talk about why you make the choices you do for yourself when he asks why you're doing something a certain way and not doing something in a more hurtful but easier manner. And help him find more peaceful ways to deal with other people.
But let pretend be pretend. Do talk about not hitting someone else who doesn't want to participate but I wouldn't use his pretend play as a platform to express your views. He undoubtedly already knows. Imagine if every time you picked up a favorite genre of book you heard a mini lecture from your husband about how bad he felt that type of book was. Eventually you'd tune him out. And I suspect that's not the effect you want your son to have to what you want to say.
I'm a peaceful person. But I loved playing Man from U.N.C.L.E. when I was a kid. I've loved target shooting the few times I tried it. I love the technology of war without condoning what they're designed for. I have a black belt in Tae Kwon Do but I've never used that power over anyone. I have a hard time destroying things, but I love old Godzilla movies and love the Godzilla video game where you get to stomp on cars and throw buildings around and whomp on other monsters.
But it's all playing out that need to feel powerful without harming anyone.
If you control what he does then you're modeling for him exactly the opposite of what you want to pass on to him. You're showing him that if you disagree with what someone is doing, then the way to handle it is to control them, be bigger and more powerful and make them stop.