Today, the primary use of a weapon like this, is to help maintain pacifist conduct. You can also used it to kill Vlad the Impaler (as a makeshift Vladbane), if you are so inclined. An other possible use is to split a pudding pet before polymorphing it.
A puddingbane can be created by engraving with it to reduce enchantment to -3. An enchantment of less than -3 is not needed for a dagger or knife, but a stronger or blunt weapon would have needed some cursed scrolls of enchant weapon.
Any non-weapon iron item, such as a key, will do d2 damage (if corroded min of 1) plus any bonus to damage from strength of 16 or more or rings of increase damage. Note that for pacifism, this is not as good as a -3 dagger or knife that will always do 1 point of damage no matter what your damage bonus. However, it will preserve weaponless conduct.
In slashem, a Puddingbane can still be used for some very limited pudding farming.