Hey, if if works for you, I'm all for it. <img src="/ubbthreads/images/graemlins/thumbup.gif" alt="" />

I don't see any discoloration and the coating doesn't look affected, so the HT may still be good. S7 is a cold and warm work steel. S7's hardness doesn't drop off significantly until you get past about 600 degF (a blue-purple color). I don't even see a straw-blue color on it, unless it was ground away after it discolored. I haven't tested it, but I'd assume that the coating would start to brown or melt at that temperature.

The safest way to smooth out the profile is to use a mousepad and sandpaper. I'd probably start with 100 grit and work my way up (100, 150, 220, 320, to about 400).
There are a bunch of guys who can probably describe this process much better than I, but here goes:
Just lay the sandpaper on the mousepad, lay the knife at the same angle as the grind you made and draw the knife back toward the spine of the knife. Try to keep the edge in contact with the sandpaper and try to keep the edge perpendicular to the backward motion of the knife especially when you round the belly of the blade lose to the tip.