@mason: From what I have seen is that once you hit enough you do a bleed damage hit. I play as a thief, and I still use the Bandit's Knife. Upgraded to +10 though. Anyway, when hitting enemies with it I would do, let's say 10 damage each hit. Once the bleed damage effect has been stacked up or something you will suddenly do an attack which does 30 damage instead. Then you scale that up and see that you can do massive damage when the bleed goes off. Those numbers are completely wrong, but that seems to be how it works.
When you do the bleed damage the enemy will bleed more, and you get a slightly louder (or at least different) hit sound. A more... bloody sound in a way.
So no gradual bleeding I am afraid. As far as I know.
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