Bloodstaff is a quest-related item in Wasteland.
There is only one REAL Bloodstaff. The rest are just fakes, and can be found throughout Needles. Using a fake on the machine in the office in Downtown Needles will result in the fake's destruction. Using the real Bloodstaff on this machine will result in the machine returning it to you unharmed. Turn the real Bloodstaff in to the Priest at the Mushroom Church in Needles (southeast corner) to receive quite a stash of goodies, inclusive of assault rifles, armor, and explosives. Say "DIPSTICK" to him to get the Bloodstaff back, and it's off to Las Vegas to show it off to Charmaine at the head Mushroom Temple and gain access to the Sewers
The Blood Priest underneath the Temple of Blood in the center island of the dark, dark bottom of that dungeon has the Bloodstaff. His buddies have a bunch of cool stuff too, including LAW rockets and assault rifles