I agree with all who point out that there is a miniscule amount ingested when mineral oil is used on knives, and probably not particularly harmful, especially when we're talking about highly refined mineral oil.
But it is not a food, and not particularly food safe, if one is to believe the medical community.
The medical literature seems to be clear that mineral oil should not be ingested if it can be avoided -- and it can be avoided, evidently. Walnut oil does not spoil, and is good for wood preservation. Tree seed or camillus oil seems to be a true food oil that's used to preserve metal and make tempura. Now that's a combo that sounds appealing. I'm planning on trying it out.
Again, I use mineral oil now, in that it is the carrier on Tuf Cloth, and I've never seen an issue using it on my hunting and skinning knives. It's probably just fine. But if I can get the same benefit, without the risk.... it seems worth trying.
Here's the MSDS on mineral oil, which definitely does NOT sound appealing:
http://www.jtbaker.com/msds/englishhtml/m7700.htm
WARNING! HARMFUL IF SWALLOWED OR INHALED. CAUSES IRRITATION TO SKIN, EYES AND RESPIRATORY TRACT. COMBUSTIBLE LIQUID AND VAPOR.
Potential Health Effects
Inhalation: Causes irritation to the respiratory tract. Symptoms may include coughing, shortness of breath. Inhalation of mist or vapor may produce aspiration pneumonia.
Ingestion:
Material is a cathartic and can cause serious diarrhea. Nausea and vomiting may also occur and possibly abdominal cramping. Aspiration of mineral oil into the lungs can cause chemical pneumonia.
Skin Contact:
Prolonged contact may cause irritation; occasionally dermatitis due to hypersensitivity occurs.
Eye Contact:
Mists or fumes can irritate the eyes. Can cause discomfort similar to motor oil.
Chronic Exposure:
Prolonged or repeated skin exposure may cause dermatitis. Highly refined mineral oils are not classified as human carcinogens. However, related forms untreated and mildly-treated oils are listed as human carcinogens by both NTP and IARC.
Aggravation of Pre-existing Conditions:
Persons with pre-existing skin disorders or impaired respiratory function may be more susceptible to the effects of the substance.