An old chemist speaking here.
This works because of the miscibility of water and ethanol. They will mix, or diffuse, into a homogemous liquid.
When a piece of wood with a high moisture content - AKA "Green Wood" - is soaked in denatured alcohol, the water in the wood and the alcohol outside will mix until the percentage is equal. Then, when you let the alcohol evaporate, it will leave much less water behind in the wood. Simple enough....
Here is the rub for knife work.
The woodturners who do this are doing it on rough turned green wood bowls. The wall thickness is fairly thin. The other thing is that when a woodworker says the wood is "stabilized" he means that the moisture content is equal with the ambient air moisture. That is a very different thing then when a knife maker says that a piece of wood is stabilized ( impregnated with a resin). A wood turner is perfectly happy with 10-15% moisture content, compared to the 30-40% green wood.
The process also does not work on any dense or resinous woods. It works well on soft, wet woods, like holly, poplar,buckeye, box elder,etc.
When I used to turn a lot, I used alcohol a few times, but switched to PEG "stabilizers" ( which won't work for knives at all).
It also takes a good volume of alcohol to make sure the water becomes a minor percentage of the final mix.
Alcohol drying won't penetrate too deeply ( at least not fast), so it might work on scales, but blocks may be too thick. There is still a good chance of some warpage with the alcohol treatment. That is why woodturners pre-turn the wood leaving some extra to take off on the lathe and make it round again.
As a treatment to speed up drying before resin stabilization, alcohol might be of some use, but at the price of several gallons of alcohol, - just letting it air dry for six months to a year may be a better method.
Stacy