Traditional way of making a saya is to re-saw a block into two pieces and carve a cavity into one. Then glue them together, shape and medium grit sand them. Shaping is very basic - rounding spine edge and giving a slight bevel to the edge side and smooth the wood.
I like to shape sayas the way a knife is shaped - bevels, taper, rounded spine and edge. All of these can be done with hand tools (rasps) or a belt sander. All final rounding and finishing I do by hand. If done properly,
you won't see a glue line and the whole piece will look like a single bock. People ask me all the time how I carved the cavity without splitting the wood. :)
Some makers, including Carter and Tsil, use inserts, as Dan described in his post above. It works, but a fit is not as precise as in a carved cavity - a cross-section of cavity is similar to that of a knife, and you will end up with two extra glue lines, so I never considered it. However, this is not how Japanese do it. At least I have not seen a single Japanese saya done in this way. For Japanese this method would be too labor-intensive. :)
This isn't the same thing I was talking about, but it is the same method. http://www.youtube.com/watch?v=8MODvFnRW08
Tsills wife if pretty talented. But it seems like the the Marko route might make a more secure fit. Of course I have never tried so I am just basing this on observations.
IMO Marko does it the closest to the sword saya maker's way. It's certainly not the easiest but the best work never is.
That belt sander is to die for.
I know right! But the belts can't be easy on the wallet.
Tom, why would you need such a big belt sander? 6x48 is perfectly adequate for all I do. That big sander if probably less flat on sanding surface than mine. I have 6x48" Shopsmith. Fantastic sander. I also have 11" Shopsmith bandsaw. Fantastic too.