I don't see sanding that upper guard down to be a problem in terms of the integrity of the handle. (But it's your knife and you take the risk.) I'd slip in into a vise and use an electric sander myself and do it slowly. I bought one of the Seal Pup Elites when it first came out thinking the extra steel thickness would make it stronger for woods use. I used it for a couple years and it gradually made its way into my dormant knife pile. Currently, it has come out of that "pile" and I've carried it a couple times in the woods in the last 6 months. This is why I don't sell my older knives. Might use it.....
I have two sheaths for mine (kydex and leather). I always felt that the weak point with that knife design was the plastic handle as it just does not feel good in the hand. But SOG's design parameters (for cost point) pretty much dictated the plastic handle. It works very well overall as far as I'm concerned.
The old Field Pup was really a nice knife for the money and using. SOG claimed it was a pilot survival knife which I can see as a possible application since it is light, strong, and sharp. I own one and have owned a couple as that was one of the first knives that I would pick up and give as gifts to nephews. It was only lacking in the sheath department, but the sheath was certainly usable/serviceable. I'd take it over a typical Mora any day of the week.