Yep. Easy as pie. Take off the frog. Use a screwdriver to remove the chape. Cut the stitches and remove the leather covering. Scrape out the carved cavern using a chisel. Reassemble. Tada!
Edited. I couldn't leave that up on ya Chris. Thats a LOT of work. One way to permanently loosten a scabbard would be to slice away some of the leather that is glued down in the mouth of the scabbard. Use a scalpel for this work and go slowly, testing often. If you stay away from the immediate lip you may be able to hide your cuts from normal viewing. If its real tight then just cut that leather off at the rim and remove the parts that go down into the mouth. If it tends to come unglued then wet it slightly and gorilla glue that sun of a gun back down. As the glue dries and foams up a little wipe away the seepage with mineral spirits on a rag. When you're done, use a black sharpie to blacken any visible glue line. Voala.