If you put a sheath (or any other leather item) in a microwave it'll end up looking like a piece of streaky bacon that's been under the grill for too long. Use something like Milton solution to sterilise. If the inside of the sheath is heavily contaminated, for example with dried animal blood, you may need to slash the stitching, open it up, scrub the inside well with hot soapy water then restitch it. If you wax the sheath inside and out after wet moulding, and force the wax to penetrate the very fabric of the leather by going over the surface with a hair drier set to maximum heat, you'll find the sheath becomes not only rock hard upon cooling, but the wax will help prevent further contamination of the leather allowing it to be cleaned more easily next time. The best advice of all though, is to clean your knife each time you use it, and put it away clean.
Eric