You should look at the Sigma Power 120 waterstones, eats steel pretty fast while leaving a somewhat decent finish with the correct use. I use this myself to reprofile by hand, along with Atoma 140x to clean up a bit after the Sigma. The Sigma has a medium strength bond so it is not to difficult to keep the surface fresh just by providing the right amount of pressure to the stone while grinding. The bond strength should be about right for what you are looking to do, from what I can tell having used mine similarly.
You could also use something like Norton Crystolon or India, but be aware that these can be quite difficult to recondition and flatten once they get worn smooth and glazed over. Actually they would be about ideal from a grinding efficiency standpoint as you can use as much pressure as you are comfortable with applying without damaging or burning through the stones. You would be surprised at just how quickly these can chew through hardened steel like this with proper conditioning and high pressures.
Regarding number 2 question, I would strongly recommend you do nothing to the knife and either keep it as is OR sell it and buy the knife that closer resembles what you are after. There is nothing you can do to lighten the handle without removing the handle slabs and either adding through holes or tapered tang. Tapered tang is not possible due to talon hole/pommel constructions, that leaves through holes
do you have a drill press with bits for drilling hardened steel? If not, you could possibly send it out to have it water jetted.
... were thinner than the stock version...I think they came in around 18/100ths.
