That thing you're talking about, it's called the blade of gyration, and it won't work in the third level. The last point of the third level, in the library, destroy the knight, open the secret door, you will get a prop, and then the third level ends.

At the beginning of the fourth level, there is a rotating blade in the room. You need to light it with a ghost hand, and then smash it out with a knife to destroy the library door.

It's as simple as that