Get a cup of coffee or something, I wrote a whole lot.
Pso, here is what I know and what I have personally experienced. This opinion of mine is not meant to agrue anyone, I just want to point out some facts that I am aware of. Take them as you will guys. No offense intended.
Pso, normalizing is a type of annealing process. Annealing is any process that involves the recrystallization of metal. There are different annealing types for different metals, alloys, steels, heat treatments and desired effects. Normalizing is used in irons and steels. It involves heating a steel at least 100°F past its Ac3 temperature. What that means is, you must attain and tranform (fully, as in 100%) the microstructure of iron into a form called "austenite" and then allow the steel to cool in still air or at least slow enough to miss the Ms or "martensite start". The temperature in which martensite forms. This technique returns the steel to "normal". It is typically only used on carbon steels or those with low hardenability. Though techniquely, you can run the cycle on anything, you just won't get a normalized effect on everything. Ac3 is not to be confused with "critical temperature" which is Ac1. Ac1 marks the very beginning of austenite transformation and the structure is nowhere near homogeneous austenite.
Whether or not to use it at all in the making of a knife will depend on all that you do to the steel. I feel if you are forging and then heat treating in the forge (by eyesight obviously), the typical thrice normalize is a good practice to insure that stresses from forging are virtually eliminated. Also, it helps to keep the microstructure relatively uniform upon hardening to insure accurate transformation upon reaching temp for hardening. However, full annealing, the kind where you let sit in an ash pit or kiln will do the same thing, but allow better machining properties and far greater stress relief (austenitizing temperature is typically lower also). You are left with a coarser grain size though. However, this effect can be negated by either normalizing or just going to the hardening temperature and quenching. There are some exceptions out there.
Well there's something to chew on.
-Jason