Hi Zack:

Nice to hear from you again, and for your sharpening query, I would very gently remove some of metal from the side of the angled cutting edge staying about 1\4" from the cutting edge itself.
I would use an ordinnary grinding stone for this part of the process being very careful not to overheat any part, as this will remove the temper. Dip it constantly into water as you work. A waterstone like the one you mention would be great, the water would keep the blade cool during the removal.
This process will hollow grind the blade somewhat.
After you have finished this process take a good new file preferrably one not too coarse and if possible remove some of the material from the damaged edge. Do not pull backwards on the file but lift it on each stroke because this will dull the file very quickly. If the steel is quite hard clamp the blade in a vise, and pull the file along the length of the blade parallel with the cutting edge, you will see that the file will bite into the hard steel better, but be careful in the process. I use a two sided oil stone to finish up the edge first using the coarse side and then the fine side.

What I have done sometimes if there is just one nick in the blade I would sharpen the nick and not remove all the material as outlined above. Eventually the nick will disappear as you continue to sharpen the blade.

I hope this helps

NH