I saw this thread and thought it would be a great idea to tighten up the knife in the sheath a bit by molding the kydex liner a touch tighter. My project got worse before it got better.
Here is what I did, and how I would do it differently if I had to do it again...
First off I pulled the kydex liner out of the nylon sheath. Mine was just attached with a dot of glue between the front of the kydex and the outer nylon side of the sheath. Then I tried to heat the liner with an iron and damp washcloth. Whenever I removed the heat the liner would try to unfold (it's a rectangular sheet with the 2 edges folded to the center to sandwich the blade within). Then I tried heating it and putting a plate from a weight set on it to get it to set with a tighter fold. Since it had already started to unfold I managed to fold one of the edges over on itself creating a big wrinkle and a pretty missshapen mess. I then heated a big bowl of water to near boiling and dropped the liner in for a few seconds. By doing this I was able to get the wrinkle to flatten out a bit. The only problem was that then it was unfolding worse. I managed to heat it again in the water and refold it around the blade so it sort of resembled the original liner, if it had been molded by a drunken fool. I finally figured that if I put the liner back into the nylon, at least the nylon would kind of hold it in place. Therefore, I took it back to the iron and washcloth. With the liner back inside the nylon sheath and the blade inserted I was able to heat the liner and form it with a phone book and a weight to where it held the blade tightly... a bit too tightly. Then I heated it again and this time, rather than letting the handle of the knife hang over the edge of the table where I was ironing, I put the entire knife, blade in the sheath as well as the handle, on the table. When I heated it and used the phone book and weight to form it, it made the top of the sheath flared perfectly for easy insertion with solid retention at the same time. The look was fine too... it wasn't so flared that it looked wrong. Finally, to make sure I had good retention I took the knife out and heated the lower inch or so of the liner, after having removed it from the nylon again. I used a phonebook and weight again to form it. This made the knife fit tightly when fully inserted, without being so tight that it took muscle to get it inserted. At the same time the knife is easy to insert and doesn't rattle or move around in the sheath. Right now the glue I used (goop household adhesive) to reinstall the liner in the sheath is drying with the phone book and weight in place to ensure good adhesion.
If I had to do this again, I would, but I would have just left the liner inside the nylon and used the iron and washcloth to heat the sheath. Then with the combination of forming with the knife inserted and removed, as I mentioned above, I would work to get a fit like I wound up with.