Well, part of the reputation of the katana isn't hype. They tested blades on prisoners, and rated them on how many bodies the blade went through in a single slice. There were two and three body blades made. On Deadliest Warrior, I saw a guy with a katana cut through two and a half pig carcasses in one cut. The speed of the katana combined with its sharp edge make it a formidable weapon, and is easier to find gaps in armor with it. Now against someone wearing full plate armor, the katana user would be at a disadvantage, yes. But they had other weapons besides the katana.
I would say that the hype around the katana isn't really based on the katana at all, though, but on the people that wielded them. The samurai with their bushido code are something of a legend that has grown with time. The ninja of myth are also legendary, as well. These things combine to make a mythos around the katana, which is pretty powerful, even to someone who isn't part of Japanese culture. The only thing we Americans have that comes close would be gunslingers out in the Wild West, with weapons like the Colt Peacemaker or the Winchester rifle. The guns that won the West aren't particularly impressive compared to modern weapons, but they still resonate strongly with people, because of their legendary past.
