I've actually seen some pretty good results in not putting too much into them. Small units of 10, as flanking elements for a larger unit, work. And, lets face it, there are several much less fragile choices for a larger unit. White Lions and Phoenix Guard aren't killed instantly by shooting like Swordmasters are. Most shooting units can get their points back easily by killing Swordmasters.
As a flanking element, however, you make them have to choose between affecting your primary unit, which will be a much bigger threat when it hits combat, or letting the Swordmasters get to whichever combat they want to. Even if you lose half the Swordmasters unit, you still can get most of your attacks from the front rank, while your primary unit is left to take on the enemy without much casualties, holding it in place for the Swordmasters to cause damage, the one thing they're really good at.
Of course, if you're a good player, using magic to buff Swordmasters near the beginning of the game can have good results. First, you'll want to look at what the enemy will want to choose. There's an element of psychology in this that you'll just have to look at the person to tell, and not everyone has the knack for it, so I won't go into that, but you can generally assume that they'll have had some experience against Swordmasters that resulted in a large dead unit. Some more experienced players may go for the larger unit anyways, trusting to another element to take out the Swordmasters, if they have them, but what you really want to look for is opportune targets other than the Swordmasters. If the only other thing they could really target with shooting is Phoenix Guard or White Lions or something, using a level 2 to buff them with Shield of Saphery with your last 2 dice is a good idea. My experience with Dark Elves and Cauldron of Blood has more than convinced me that a 5+ armor save and 5+ ward save is just about the best protection an elf could hope for when not cavalry. Generally, the buffs from other lores would be too expensive to waste on a unit that's really best as a supporting element.
Indeed, I'd agree in the case of large games. However, there isn't much room to have a big unit in 800 points and annoyingly, I lack enough Spearmen to use the hammer-and-anvil type tactic you seem to be describing.
In my list, I have a rather large unit of Swordmasters, 16 in fact, and hope to use magical buffs to keep it alive. One problem, I don't get first turn then they die.