It's not as if the weapon is useless, but it just can't touch some things. Against most infantry it will be great, but against storm shield wielding space marines it will still struggle. Good thing there are hounds and spawn to tie those up a bit and whittle them down. And it will do fairly well against riptides.
As for the wording and instant death, any wounds inflicted on a 6 have the instant death rule. However, S4 cannot inflict a wound, and thus cannot cause instant death against T8.
All in all, I think the book has better choices on offer at that pricepoint--at least the Bloodthirster of Unfettered Fury gets it for the same cost as the C:Daemons 'Thirster, so though it already has AP2 at Initiative, it still has Decapitating Blow for no price hike...
(I'm not going into the unfortunate lack of Greater Rewards, though. Bleh)
Chaos Lord yes, Daemon Prince no. Depending on the army you're fighting, going at I1 could work out. Maybe Tau, or something.
Well, don't buy an Axe of Khorne for the DP either--it already has AP2 at Initiative. It's unfortunate a Daemon Prince only has 1 weapon to swap for the Goredrinker, though, I can't help but think--the Goredrinker is the closest thing it can get to a power fist, since once it causes 5 unsaved wounds "with its melee attacks," so if it had another weapon it could make I8 attacks with to power up to the 5 kills he needs for the S10 on all attacks. *Sigh* ah well, fragile DPs striking at I1 is not a recipe for success, and it's only Walkers, not MCs, that ignore Unwieldy.
Oh. Oh. Perusing the wargear... and I did not realize you could buy Collars of Khorne for characters! Bring on the 4+ Deny the Witch saves for units aside from Flesh Hounds!
On a related anti-psychic note: when will GW realize that only DTW rolls aren't enough: ok, perils on any doubles is decent, but we need a way to generate more dispel dice without taking psykers, too! Some sort of icon for a few points that adds 1 dispel die per turn or something... *continues scribbling wishlisting*
MCs definitely ignore unwieldy, along with walkers. For the artefact it's less about AP2 as it is for more strength so they can annihilate stuff (should they survive long enough to fight in two combats, unlikely as that may be).