I love leather handles, and do a few, mainly with crown stag rear. Haven't done a full leather handle yet, it's on my to-do list.
The way I do them now is to cut into squars, soak with accureglass epoxy, stack 6-8 at a time and compress in a 20 ton shop press. Let sit for 24 hours and it's basicly a epoxy laminate. I have tried soaking with water and compressing and letting dry first, but finaly figured out that that was a wasted step, unless I wanted thinner layers. I then drill out the center slot for the tange and true everything up and use the blocks like there wood. If I need a thinner block I trim off what I need on the bandsaw. The leather does get a little fuzzy where you saw and grind it, but I epoxy it together with accureglass and haven't had a problem with shirnking or expanding. After grinding to shape and finishing to 600 grit I soak the leather down with Zap super thin super glue to fill any pores and then sand back to smooth. It makes for a glass like finish, but I loose some of the gripyness of the leather. Not as bad as polished mycarta, but not as good as oiled leather. Of course it's a lot more stabile than natural leather too. I still wax afterward too.
Untreated leather like your father's knife, and my fathers Vietnam kabar for that matter, I think rotted from sitting unused and uncared for. Even if you don't use it some materials like natural leather, horn, ivory, stag, and such need an oiling or waxing every six months or so just for preventative maintance. Sounds like the leather dried out from sitting in the gun cabnet.