Patch Available - KMST 1.2.408

They're actually not.
They -need- a shield equipped so they're inherently weaker than demon slayers already because they don't get full potential of the 2h weapon...

Um... what now?

First of all, Demon Slayers are the ones who need a shield equipped. Literally, they can't do anything other than spam their basic attack without a shield.
Paladins don't need a shield, but one would be daft not to use one.

1H is better than 2H. Period.
Faster weapon speed paired with an additional item from which to get both W.Atk and Potential lines means that the best end-game set will always include a shield.

Well, the extra guard chance of shield mastery helps but 10% is really low.

Not when paired with the 42% block chance from Guardian.
Depending on how the two skills interact, Paladins could be blocking close to or even more than half of the attacks thrown at them.