One part of this card that might not be obvious at first glance is that if your counterattack defeats the enemy, it effectively prevents the enemy attack from resolving, unlike the level 0 Survival Knife. Besides this, the timing change also allows you to counterattack, then respond with other effects like Dodge if your attack does not destroy the enemy. This seems especially tempting with Diana Stanley who likes using cancel effects. With the +2 combat bonus, this card is a definite consideration for many investigators. In comparison, the nerfed Machete costs the same XP, gives only +1 combat bonus, and has the potentially dangerous limitation of doing less damage when you are engaged with more enemies. If all of the attacks hit, survival knife does 5 damage versus 6 for machete. Timeworn Brand is usually superior, but the 5 XP and 5 resource cost are limiting. Importantly, a Survival Knife complements other weapons and other copies of itself by increasing the total damage done in a turn. 2 survival knives can do 7 damage in one turn. Overall, with the good combat bonus, low cost, synergy with itself and other weapons, and lack of drawback, I think this is probably the most broadly useful weapon for guardians at below level 3. I’m excited to use this card, especially with Diana.

This is a great upgrade! Let's go over what you get for 2 xp:

• Headliner first: The reaction is changed from "After an enemy attack deals damage to you during the enemy phase" to "When an enemy attacks you during the enemy phase (before resolving that attack)". The other commenter already pointed out how this means that you can avoid taking damage from incoming attacks altogether so long as you kill the enemy, which is indeed great when it lines up, but can be a bit situational. There are two other consequences of this change that make the knife much less situational than it was before. Since it triggers on attack instead of damage, enemies that only deal horror can no longer attack you with impunity! Since it triggers on attack instead of assigned damage, the weapon now pairs well with soak - your allies can take the brunt of the attack and you can stab the enemy back with a vengeance. These changes mean that you can rely on the reaction in a way that you couldn't before, I love it.

• A second on the activation. Usually this would be the headliner on a weapon upgrade, but since this is usually your offhand weapon it ends up being fairly low impact. But when the draws don't line up and this is all you have, it's a welcome boon - another boost to the weapon's versatility; its worst case scenario is less bad.

• A second on commit. Not bad, added versatility!

Overall, I really like upgrades that take a situational card and make it feel smooth. The previous knife felt like it had high highs but frequent awkward lows. This upgrade brings up the floor quite a bit and also gives you new highs to explore: suddenly the hunter keyword just saves you the work of moving to them. If you ever kill an enemy without taking a single action or taking a single damage, it just feels incredible.

Never bring a mysterious glowing eyes to a knife fight.

Ruling from Alex Werner, FFG Game Rules Specialist via the official rules question form:

Question: Hello! If during Mythos Phase, the treachery Watcher’s Grasp makes the Spectral Watcher “move, engage, and attack as if it were the enemy phase,” can I swing my Survival Knife (2) at him, which has a reaction trigger of “when an enemy attacks you during the enemy phase”?

Answer: No. Survival Knife (2)’s reaction ability can only be triggered during the enemy phase; Watcher’s Grasp does not create an “enemy phase.”

(So if enemies attack "as if" it's the enemy phase, Survival Knife cannot "resolve with the altered game state in mind," in contradiction of the FAQ rules on "As If...")

I asked to FFG :

When an enemy with elusive attacks an investigator holding a Survival Knife(lvl 2 :Return to the Forgotten Age #2) ?

What happens after the knife reaction attack ?

1. If the enemy dies after the attack, I guess we doesn't resolve the enemy attack ?
2. If the enemy doesn't die, I understand that the enemy will disengage and move to another location. But should I resolve the attack and so apply damages to the investigator with the knife ? I guess no ?

They (Alex Werner) answered :

Say an elusive enemy initiates an attack against you, triggering the reaction ability on Survival Knife (L2). First, you resolve your attack against the enemy. If the enemy survives the attack, it moves via its elusive keyword, exhausts, then completes its attack against you (since that attack was already initiated). If the enemy is defeated by your attack, it does not complete its attack against you.