Doing a complete 180 on the gimmick was actually a pretty neat idea. Props for that.
I will say, this weapon still isn't that useful outside of cheese setups (for example taking a bunch of 1 damage hits from spikes, lava, fall damage, or just a weak enemy like a Bee or corrupted critter while you hit a tanky enemy over and over) as most bosses have too much contact damage to reliably proc this thing mid-fight, but cheese setups which require that much effort tend to be more difficult than actually fighting the boss normally so I think it's actually pretty healthy to have them.
I'm not sure why you're so adamant about this being on a shortsword though. You could honestly put this on any weapon with infinite reliable range and it would still be difficult to use considering the gimmick requires you to take damage (reminder even the weakest boss in the game has over a thousand health in the lowest difficulty, while the player has 600 by the end of the game assuming they went out of their way for the rarest potion and used it temporarily, so spending health as a resource generally should be biased in the player's favor). Putting this on a shortsword basically ensures that it won't see use outside of cheese setups and facetanks, which is fine if that's what you want, but weapons like that tend to be unpopular. If you're concerned about the uptime being too easy to maintain with a ranged weapon, you could always make it a stacking damage buff that decreases over time (and scales with the size of the hit that caused it) instead of it just being cumulative and permanent so long as you're hitting something.