From my reading, true damascus is more of a marbleized material that is acheived by adding the two materials in a crucible. "Pattern welded" is often called damascus because of its similarity in appearance, but it is acheived through the welding of already made pieces of iron and/or steel. Pattern welding seems to have been more popular in Europe, but eventually fell from favor due to the improvements in steel manufacture.

I love the look of PW sgians, but I have a feeling they were uncommon in period. It's a small enough knife that a monosteel blade would have been easy enough to priduce.

Having a blade directly against leather actually isn't the best for the blade over long term (most sword sheaths were wood cored), but it isn't terrible, and as long as you maintain the blade it should be fine. I think leather is a good choice for a sgian because it stays in place well.

Cheers,
Nick