You are most likely going to have to do it by hand. Pictures of the scratches would help. Your impression of scratches may be different than mine, but I am guessing if you used that heavy of equipment they are pretty deep now.
Usually I would find something or make something of the same radius as the blood groove to back my sandpaper with. Then for the front and rear of the groove use something half spherical for kinda the same thing, a blunt object to sand in there. Work up through the grits as usual, then a buffing wheel or preferably a felt bullet on a rotary with good compound to polish it out. Grinding into the blade is going to change the knife irreversibly and therefore make it no longer a spec camillus military. If you are restoring it, the final finish should be parkerized which can cover up scratches of 320 grit or so on up...
I have restored several M-3 fighting knives from various makers over the years of collecting and usually I try my best to retain the original patina to some degree. Really just pretty it up presentstionall speaking. The older the knife the more 'proper' a little patina is. Of course, if you totally pooch it, get another. They are out there for around $40-75 or so. Unless of course this particular one has a sentimental value... I can help you date it with some pics and some stamping data.
Good luck. I spent years collecting and restoring/maintaining knives and tools before I ever started making any. There are a host of good books and reference materials out there with great tips/tricks and methods for restoring these types of things.