In the oven it will completely relax, losing all the shape it had. What kind of rivets and mounting hardware are on the sheath? If the hardware isnt much thicker than the sheath itself you could use an oven and a press with some foam to get a very nice fit on the new knife. If there is a permanently attached belt loop i would recommend using a heat gun or just getting new kydex. When i was making my first kydex sheath the fit on the blade was a little too tight so i dropped it into boiling water in an attempt to slightly soften it, bad idea. I ended up leaving the chicago screws in, putting the whole thing in the oven and repressing it from there, it came out very well. A heat gun would be very handy if you were going to be making a couple more of these as it allows you to tweak the mouth of the sheath or fine tune the sheath. I just use an electric element on the mouth though and it works fine. Try an oven temp of 300deg, and keep an eye on it. When the ends of the kydex get saggy pull it out and form it. If you will be forming it by hand than Gloves are a good idea as you can only hold onto the hot kydex for a few seconds before it starts to burn.
edit: A $15 woodworkers vise is a great HD purchase, you can use it to hold a knife while working on it and its awesome for pressing kydex. A heat gun is not a neccessity, though If i had one i would certainly be using it. If you get into making your own sheaths a hacksaw or scroll saw is needed to cut out the shape. A beltsander is a great knife buy. You can use it for sharpening, shaping, and in kydex it would make the final shaping of the rough cuts a lot less labor intensive than using a file and sandpaper.