It is an artifact with a provenance. The only thing to do with it is to accurately record its history to date, and to mount it with said history in a shadow box. If the box could be filled with nitrogen and sealed, that would be about the most I would do.
To paraphrase The Lost Ark, right now it's simply a beat up contemporary relic. Bury it in the sand for a couple of thousand years, and it will be an archaeological find.
Restoration, or more properly, curating, is something best left up to museum staffs, who will likely not proceed until their organization attains ownership; which I doubt you'd like happening. If they want to buy, I doubt they would pay well unless the Kabar in question has some unique historical significance.
When I acquired my Garand, an October 1940 SA with a 5-digit serial, I did some restoration, but only to improve the appearance of a shooter. After a refinish with linseed oil, the correct original finish, I applied some curator's wax. It was then kept in a steel gun cabinet untouched for about three years. It turned a speckly white, looking for all the world like some form of mold. I would advise against the wax.
You can buy a Kabar and put it to your own use in the place of anything you might be able to accomplish with that artifact.
I see some quibbles about the makeup of modern Kabars. While they are accurate, they may miss the point. That's your Grandpa's personal weapon, and it is imbued with his story and is an integral facet of his own history. That should be left as is, and be a representation of the breed as it was when and after its acquisition.
A new Kabar would be the inception of its own history and your history. So get a new one and embark on your own history.
...And my condolences on your grandmother's passing.
Greg