To me, the problem with allowing the Dragon Fang to bypass Magic Guard and Sheer Force is that it outright ignores the game mechanics themselves.
Magic Guard prevents indirect damage from all sources. Since that includes Life Orb, Rocky Helmet, Iron Barbs, Rough Skin, etc., there is no logical reason for that to not apply to the Dragon Fang. The only exceptions to that rule are Struggle recoil and Pain Split, and Pain Split does not technically even deal damage. In fact, Pain Split is technically healing even for the Pokémon that ends up losing health overall. (Yes, a Magic Guard Pokémon still loses HP from using Belly Drum, Ghost Curse, and Substitute, but those are arguably self-induced direct damage.)
Sheer Force negates secondary effects by skipping the secondary effect check altogether. The game simply branches straight past post-move effects. As we've seen, this includes Life Orb. But that's not all. It also affects a foe's Red Card or Eject Button, and even stops the ability Colour Change. The only thing that could possibly justify the Dragon Fang ignoring Sheer Force's effects is that Sheer Force does not negate the effect of a foe's Iron Barbs, Rough Skin, or held Rocky Helmet.
If you want to make a less-stupid version of Dragon Fang, one of the item submissions in Noble Items was a Muscle Band that granted 1.15x Attack and 1.15x Speed with no negative impact whatsoever. That seems to me to be a much more useful item with a more positive effect on the metagame, allowing strong physical attackers that are ordinarily slightly lacking in Speed to speed-creep otherwise faster attackers. Its utility lies more in revenge killing than in enabling a sweep itself. If you wanted to, you could clone the effect for Wise Glasses with 1.15x Sp. Atk and 1.15x Speed. In fact, you could even reduce the boost to 1.12x in both Attack/Sp. Atk and Speed to make the item more speed-creep-y and less I-outspeed-everything-y. It also might let you use things like Primeape or Leafeon viably now that they have relevant Speed.
Heck, you could even make it an item that does something like "The holder has 1.12x Attack. If the holder is of a species that has less than 100 base Speed, their Speed is 1.12x as well." That could bring a few slightly-too-slow attackers out of UU while not introducing too much speed creep to the meta as a whole. This actually seems like the best idea to me. Rather than Dragon Fang, have:
Muscle Band: Holder has 1.12x Attack. If the holder is of a species that has less than 100 base Speed, their Speed is 1.12x as well.
Wise Glasses: Holder has 1.12x Special Attack. If the holder is of a species that has less than 100 base Speed, their Speed is 1.12x as well.
The biggest problem that I can see is that this forces you to rename your Pet Mod to "SIX ITEMS", but other than that I think it likely works much better on the whole.
Edit: Edited to fix grammar in a few spots, and to add a little more detail at the end of the post.