How about this instead:
As the Werewolf, items can not be held, but your claws do a considerable amount of damage and you are invulnerable to anything but silver (or Steel if Silver is never added), and in SMP, it can be spread to other players through harming but not killing. When you die, you no longer have the disease. As the Werewolf, you do not have full control over your actions, with the game controlling it and making it go after mobs and players at times. This can be fought however, by moving in the opposite way the disease is making you. As the Werewolf, you can dig through dirt and sand, and if there is nothing to kill in a certain radius, the disease will make you attack things like trees, workbenches, chests, ect.