It does? The only thing I see is that strength bonuses from weapons are ignored if a unit is under the effect of Mindrazor, I don't see anything about it affecting magic weapons specifically. Malekith's blade would still work as it doesn't increase his Strength value, it just attaches the Multiple Wounds (D3+1) special rule to his attacks.
That's pretty much it. Even basic Elf Spearmen or Swordsmen can annihilate pretty much anything when they have Mindrazor.
How does Archaeon beat Malekith the Eternity King, exactly? If we run the numbers, Malekith needs 5s to hit Archaeon and then 3s to wound, re-rolling all failed to-hit and to-wound rolls with 10 attacks. When we round all fractions to their nearest values (if I make a mistake feel free to correct me) Malekith strikes first and averages roughly 5 hits and 5 wounds per phase, if we assume Archaeon is on Dorghar then his 1+ armour save is down-graded to a 4+ (Strength 6), and he then gets his 3+ ward save. He should fail a saving throw roughly once each phase, meaning Malekith will do at the very least two unsaved wounds per phase due to his D3+1 wounding sword. When Archaeon strikes back, he needs 3s to hit and then 5s to wound with 10 attacks - he does not get re-rolls to hit against Malekith, nor does his sword give him any bonus to his Strength value; it just ignores armour saves. That's roughly 7 hits and 3 wounds done to Malekith who gets no saves (Archaeon is Strength 5 versus Malekith's Toughness 6). Malekith kills Archaeon in two-three rounds of combat, Archaeon kills Malekith in four rounds of combat assuming average rolls; don't forget that I'm not even accounting for the hits Archaeon will suffer from his sword when he rolls 1s to hit.
The cold hard numbers favour Malekith when it comes to fighting Karl Franz Ascendant as well. His 10 attacks need 3s to hit KFA (Malekith is WS8, KFA is WS7) and he re-rolls everything from to-hits to to-wounds, meaning he averages around 9 hits, then needs 3s to wound (Strength 6 versus Toughness 5) with re-rolls, averaging 8 wounds. KFA only has a 3+ armour save which is reduced to a 6+ by Malekith's Strength 6, meaning he passes 1 of the 8, leaving 7 4+ ward saves for him to take. If we round-up in favour of KFA, he suffers 3 unsaved wounds which are each multiplied into D3+1 by Malekith's sword. That's an average of 9 unsaved wounds once they are multiplied, meaning KFA dies in 1 round of combat to Malekith before he even gets to strike (unless I'm mistaken, KFA has 9 wounds base). Even if KFA gets to strike back against Malekith - which he won't assuming average rolls - he still only does 5 wounds to the 10 wound monster before Malekith kills him anyway. Don't forget that the two are only 190 points different to each other, and Malekith is a Level 5 Wizard with some of the most insane support abilities in the game.
Malekith is a Level 5 Wizard that is a Loremaster (which is absolutely insane in End Times Magic) and adds one free dice (which he can also re-roll) to his first failed casting and dispel attempts each phase. As I've proven even without considering how good he is with magic, he CAN go toe-to-toe with the nastier characters; easily, so much so that he annihilates KFA, Tyrion (with the Widowmaker) and Nagash in one round of combat. He beats out Archaeon, and he also absolutely monsters the Glottkin who are completely incapable of even harming Malekith outside of the magic phase as they lack magical attacks. The only characters with magic weapons that have a chance of surviving to even consider dealing damage to Malekith usually cost in the 700 point range; 500 point Blender Vampire Lord builds get KO'd in one round by Malekith and don't do nearly enough to stop him once he reaches the enemy battle lines. In fact, the standard Strength 7/Quickblood/Red Fury Blender Lord only averages 3 wounds per phase to Malekith due to needing 4s to hit with no re-rolls, and needing 3s to wound. If we round-up, the Blender Lord gets 3 hits out of the 5 attacks, of which 2 wound (Strength 7 versus Toughness 6), generating an extra 2 attacks. One of the 2 attacks hits, then proceeds to wound, meaning Malekith suffers a total of 3 wounds from a Blender Lord per phase assuming average rolls. I don't need to show you the numbers to tell you that Malekith insta-gibs the Blender Lord simultaneously. Considering the Blender Lord is widely considered the best generic combat character in the game, and Malekith stomps all of the named heavy-weights listed above, I think it is safe to say he is easily one of the top three combat characters in the game. I've not even been accounting for his Breath Weapon or Thunderstomp (where applicable).
I've run the numbers and both put Malekith to use and seen him in action; he is absolutely terrifying and while not as game-breaking as Nagash with End Times Magic, he comes very close as outside of spamming magic spells you simply can't pin him down. Pray you aren't playing a big enough game where the HotEK player is also using Alarielle, Incarnate of Life, it's just bonkers. If Malekith lacked mobility then he would be manageable, unfortunately as a flying monster that is better with Shadow magic than anyone else and gets to freely move any friendly unit 20" a turn without needing to cast a spell, good luck getting him into a vulnerable position as any decent Dark Elf player in particular will absolutely dominate the Movement phase with him.