I guess I'm a little late to the party, but for any other interested parties, check out
KnifeKits.com™ : Knife & Gun Making Supplies and Tools for several options for sheath-making kits and supplies in both leather and kydex. I haven't worked with leather, but if you're looking for a DIY project, kydex is really easy to work with and very forgiving. You can heat it, mold it, re-heat it and re-mold it infinitely, apparently. I've made a few sheaths so far using a heat gun as my heat source, works fine. It's available in a variety of colors and patterns. There are some great tutorials on youtube.
This one took less than an hour while teaching my brother the process. I can probably do a simple one in a half hour.
Jason