Aha, thank you. I believe I have the Iaito, but the damage rating didn't seem great? My rapier +5 is doing around 129 damage, the Iaito was listed as 88? I think I've completely failed to take into account that they scale with Dexterity, so I could be getting a boost with that sword. I'll report back!
@Demikaze - There's no merchant but haven't you picked up any other weapons? Use something else for the meantime (there are even a few weapons lying about the area if you look around) and make your way up the big wheel to the top. Be careful here as some of the ladders aren't obvious & the berserkers at the top can be a pain in the arse (open the chest with the key at the top of the ascent too).
this route will take you out to the Valley of the Drakes, but you can cross the wood bridge immediately in front of you to get to the beginning of New Londo Ruins (through the gate). There you will find a blacksmith, can't remember if he sells a repair/smith box, but he can repair thing for the time being. Go up the lift in the same area to get back to the Firelink Shrine and onto the Burg in order to buy the gubbins from the Undead Merchant.
Hope that helps!
EDIT: The first bonfire??? The one up on the gantries?
If it's the first bonfire and you're using a rapier, that means you're a dex build? There is a very good sword (the Iaito), plus the wanderer's set that includes a falchion. Have a little explore around the place & use a different weapon for the meanwhile.