This is an old thread, but I feel it is worth a quick post to note that while sawmill blade steels are indeed low hardness compared to steel heat treat for optimal knife use, I have found they are still more than capable of making a useful knife that holds a good edge. And grinding steel of any hardness is not a problem for the existing heat treatment and temper, as long as one uses appropriate heat management, the most basic method of course being "grind, dip, grind, dip, etc."
When I first started knife making, it was with pre-made blanks, and eventually a friend turned me onto making my own out of sawmill steel. I made a good dozen or so that way without heat treating, and I found that they not only were able to take extremely sharp edges, but they held their cutting ability surprisingly well for most EDC tasks like cutting cardboard, paper, packages, string, food, etc.
The problems that unheat treated sawmill blade steel present are that while their edges are not liable to chipping like harder blades are, they do have a greater propensity to roll if used for cutting hard media, and if ground too thin, their tips will bend much more easily than a knife hardened to a higher RC.
I eventually started heat treating them, and then moved on to other steels (1084, AEB-L), but when it comes to affordably making a knife for moderate use, my experience is that sawmill steel is a great way to go because even without heat treatment it can be ground quite thin for slicing, takes an extremely sharp edge far surpassing harder steels with large carbides, and is very easy to sharpen. Sawmill steel will work "as is" just fine for affordable kitchen cutlery, self defense tools, and EDC not intended for hard use tasks - as long as the customer is informed. I even made myself a couple machetes from "as is" sawmill steel, and they demolished everything I threw them at in the woods of Southern Ontario, in any given season - which even included hard chops into dead wood (the geometry on that machete was pretty thick though).
All that being said, I have for the most part moved beyond using sawmill blades steel, although I do still get requests time and again from people who like the romantic notion of owning a knife made from repurposed tools.