Here's the process I follow (right or wrong) <img src="/ubbthreads/images/graemlins/grin.gif" alt="" />
1. select the steel - type, thickness, width, & length (3/16" A2 for me) and order (order fully annealed steel. Annealing makes the steel very soft and easy to work. If it's not annealed, then cutting and drilling it will be very difficult if not impossible.

2. draw a pattern on a sheet of paper and cut it out (keep the cut-out knife sillohette, you'll need it later

3. see how the pattern feels in hand, repeat step 2 if if feels weird or doesn't fit

4. once the pattern fits and you are happy with it, lay it over the steel and trace using a sharpie (fine point works best for me)

5. remove pattern and admire and get a coke <img src="/ubbthreads/images/graemlins/smile.gif" alt="" />

6. go back to steel and attach cutoff disc to dremel tool

7. lightly trace the sharpie outline to make a scratched outline in the steel (this is to make the line permanent so the line won't wipe, wash, or burn away)
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8. cut out the blade shape. some people use a vertical bandsaw, or drill holes around the perimeter, or continue using the dremel cutoff wheel (suggest fiber-reinforced if you want to use the dremel), I use a combo of the dremel cutoff wheel and a 7" metal cutoff blade attached to my bench ginder in place of a wheel. This allows for access to small inside curves.

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9. sit back and admire your work. You're about halfway home. <img src="/ubbthreads/images/graemlins/smile.gif" alt="" />

10. start grinding what's called the "primary grind". some people like to start this process by using a about a 1/8"-3/16" round file near the choil to make the "plunge cuts" even on both sides before starting with the belt sander. I don't do this (not sure why, though). grind first with the coarsest grit. Once you feel the blade grind is about 90% complete, start moving to finer grits. Once all the grind marks are gone from teh previous grit, move to a smaller grit belt. I like to end on about 240 - 320 grit before heat treating.
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[Linked Image from i247.photobucket.com]
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11. This is the point where I drill my holes. If the steel is fully annealed (purchased that way), this is not very hard (no pun intended <img src="/ubbthreads/images/graemlins/grin.gif" alt="" />) Use the SLOWEST (I use 160 rpm) drill speed you have (just about any drill bit will work (DO NOT use brad point drill bits) and alot of cutting oil (3 in 1, or any heavy lubricating oil). This will save your bits and make them last much longer. This is where I tap my handles because I use screws to fasten my scales to the tang.

12. heat treat - if you are using stainless, you'll want to send it out. stainless steels require a very high, precise heat 1900 degF for an extended period (35-45 min). I can do this, but I can only air quench. Texas Knife Supply can do this - I've heard their prices are reasonable.

13. Once the blade has been heat treated, you can hand sand the finish on it. Using 240-500 grit sandpaper.

14. Cover the newly finished blade with masking tape to protect the finish.

15. cut out handle material. I use 1/4" thick material for just about everything. 5/16" is just about as thick as I have ever used.

16. Match drill both scales to match the holes in the tang

17. Attach the scales and shape scales to match the shape of the tang. Finish scales accordingly.

18. Viola! Knife!
[Linked Image from i247.photobucket.com]
[Linked Image from i247.photobucket.com]

My first knife:
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