In Issunboushi, there is a line that goes like this. "Issunboushi wa hari wo katana ni shite koshi ni sashi" I found a translation that says "He made use of a needle as a sword", but I have no idea why. True, hari=needle, katana=sword, but I couldn't find any grammar to help me understand the form of this phrase. Where does the "made use" come from? What does "koshi ni sashi" mean? Thank you in advance! :)
The part, "katana ni shite", means to use as a katana. *
As for the other question, "koshi ni sashi" is an old way of saying, to "put in/on his belt". Koshi meaning hip, and sasu being the verb for insert/put in [belt].
*Note that this is not the same as "ni shitemo", which is a pattern meaning "even if".
I'll put this as an answer but @oals explained it perfectly.
AをBにする (3) to make use of A for B; to view A as B; to handle A as if it were B.
In this case the "suru" is in the te-form, so it becomes "shite".