That story is not just apocryphal, there are two other major fallacies. First, no sword could cut an anvil in half (especially not a medieval European one - plenty of research has been done in that department recently). And second, Saladin couldn't have had a scimitar because it simply did not exist as such at the time. In Egypt and Syria straight swords were still predominant at the time. The saber became popular only a couple of centuries later and the scimitar was a more recent development still.

If the story is that inaccurate I wonder if the silk scarf cutting test makes any sense at all?!