Bruce-
Check out the following link -K & M Creations @
http://www.montana.com/beadwork/.
I've done a bunch of beadwork over the years myself and it is very painstaking and very time consuming, so I farm it out to these folks. They do very nice work for the price.
Maynard Whiteowl Lavadour, ( see some of his work here
http://www.jeffreymoosegallery.com/exhibit/gallery/97_06.html) who is one of the best Native American artists in traditional leather/beadwork taught me that the easiest and best way to cut fine fringe is to use a pair of scissors. In fact he uses the el cheapos and throws them away when they get dull, because it takes more time and therefore costs more than to resharpen.
First when working with any kind of buckskin PRESTRETCH it. If it's modern tan dampen thoroughly and then stretch out on a board and let dry for 48-72 hours. If it it is brain/smoke tan just stretch it without wetting and leave for 72 hours or so.
If your right handed (scissors in that hand) start at the left side of your item and don't cut the fringe, rather take and slide the scissors up the seam, be careful as you get to the edge of your project that you don't run the scissors up against it and ding it. You may have to make one small snip at the end to finish it off. Try for about an 1/8" fringe, but don't worry about keeping them all exact as the original stuuf varies in width. If you cut one a bit too wide just trim it down. I always find that after a while the balance of the uncut fringe starts getting a bit wedge shaped (the cut edge is no longer at 90 degrees) so I cut the wedge out and bring it back in line.
Another guy I know grows his thumbnail long to use as a guide and uses a very sharp knife!
For a sheath like this I think a 2-3" fringe would look real nice.
Here is an example of similar style fringe on a full beaded neck sheath, I made for Pete Espeseth. The danglies are nickel cones which were used a lot.
Hope this explains it OK. If not give a shout.