Rick, the way in which your scabbard has been adapted for use is a style that some m'ranggis in Solo (Jawa Tengah) call "wayang" style, yours looks as it it has been done with some sort of compound, but the preferred way to do this is to enlarge the gap by about 1/8th of an inch, & then very neatly fit a wooden plug in a contrasting wood, this new wood is then inlet to take the new blade.
The end result --- when done well --- is pretty impressive.
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