Ambers are one of a kind, and yes, give it to the blacksmith. With it, he can modify +5 weapons into divine weapons. There are no other use for the ambers so just bring them to him once you find them. Divine weapons will permanently kill the skeletons in the Catacombs. I haven't tried using them against ghosts, but I think I remember reading that only a magic enchanted weapon (different amber) can hurt ghosts.