Hi, Molinee ... and welcome to Colorado. We're a native here, so sometimes get a bit critical of the place, the politicians, growth and such. But overall, it's better than a whole lotta other places to live.
Sounds like you have an ideal vice for the purpose. I've used both Crystolon (gray silicon carbide) stones with water and detergent, and India (aluminum oxide) stones with oil this way, no problems with either. Sometimes you'll want to add a bit of extra water or oil while sharpening, but no big deal there.
Also, you don't necessarily have to just make downward, "slicing" strokes like you do on a Sharpmaker. For heavy reprofiling of thick edges, I'll work the knife in a sort of circular pattern, same as you would a benchstone laying flat on the workbench. When finishing up, though, I tend to use nice, uniform downward strokes, just to leave a more uniform bevel finish, and guarantee a straight, consistent edge.
About the only thing you kind of have to watch -- other than keeping the blade pretty much vertical -- is that if you let the knife get angled a little bit left or right, it will drag along the edge/corner of the stone, rather than across the flat surface. This doesn't hurt the knife, but it feels kind of rough, and would probably cause some fast wear on Crystolon stones. But you'd figure this out quickly, it's obvious when it happens.
As for the 3-1/2 inch blade law ... most Colorado law enforcement are no problem. If you're not drunk, disorderly, being hostile, or making trouble of some kind, they have no reason to bother you, and few would risk performing a search of your person under such circumstances, since they would have no probable cause. Most officers here appreciate the citizen's right to self-defense, and give you quite a bit of leeway if they perceive you to be one of the good guys. I've known countless people who've carried concealed handguns in Colorado for years without permits ... and as one attorney I knew who did just that stated, honest, responsible citizens are cut a lot of slack.
That said, I would never *recommend* anyone break any law.
Good luck, and let me know how the sharpening trick works for you. With very little practice, you can put nice, clean bevels on blades this way, that typically look as good or better than what the factories put on.