You could very carefully use electrical tape to completely mask off the wood or coat the wood with coats of super glue (difficult as you must sand superglue smooth and have it all completely removed from steel before etch.), and then dunk it in ferric chloride for about 15 minutes. There are hazards, like a bad spot in the scales to tang epoxy letting it between them. If you want this area to keep the Damascus look it is best to somehow attach the scales in a temporary manner until the sides are completely finished to at least 400 grit, them remove and carefully finish to as high as you wish. The sides of the scales, pins, bolts can be finished after permanently attached if you are careful not to hit the edges. I have started using 1/4" hard plastic tubing with small bolts that fits tightly inside the tubing and a few drops of super glue on the sides of the tang to hold my scales in place. Put a pit of epoxy on the outside of the plastic tubing and tighten the small bolts swelling the plastic a bit and holding the scales tight, then I finish the edges real well and then go to work on the sides. Before you grind off the bolt head and nut remove them. When you are real close with the sides easily drill out the plastic, pop the scales off the super glue bond and reassemble with epoxy and some nice 1/4" mosaic pins after you redo your damascus etch. Then carefully flush up the pins with a file and finish sanding the sides to what ever grit you want.
Thats what works for me. Some guys use double sided carpet tape. Some guys have the skill and the patents to do the edges with out touching the original damascus etch.