Thanks to everyone for contributing to this discussion. Here is what I would write for an FAQ from what I know now (obviously reflecting my biases):
Q. Are sheath knives permitted in scouting?
A. Sheath knives are not banned by any official BSA publication. The Guide to Safe Scouting does say "Avoid large sheath knives. They are heavy and awkward to carry, and unnecessary for most camp chores except for cleaning fish."
Most people agree that large sheath knives are not appropriate for most tasks you are likely to perform while scouting. However smaller sheath knives (with bla