Honestly, this is pretty good work. The oxidation you have left looks healthy and the pitting is typical of knives that age. The bevel is straight and clean, doesn’t look like the knife is bent. For what it’s worth I can and have done full polishes through pitting like that and in a recent restoration I chose to stop just a hair after where you are.
If the pitting really bothers you, smaller blades (particularly blades in pinned knives like that) are best polished by hand with minimal tools, power tools are too fast to be precise and the pinned handles are too close to the blade to keep them safe. You’d want to mask off the handle, place the blade on a soft surface butted up against the edge of the table, handle off the table, and polish the blade with heel to tip strokes of a dowel wrapped in sandpaper, starting around 100. Once all the pitting is gone (and only once all the pitting is gone) you’d go up gradually in grit to maybe 240; where you stop is a personal preference, but it’s going to oxidize a little in the future, so a super clean polish wouldn’t last.
I would not suggest learning to sharpen this freehand. Small blades are hard and knives without locks are hard. Get a legit pro to do it (they can take out the recurve in a few minutes) or buy a Sharpmaker (which can handle recurves well). Recurves in working knives are not a big deal.
Knife stuff is pretty niche. A lot of what people do is based on experience and conjecture rather than a complete understanding of what they’re doing.
Your pocket knife, while cool and sentimental to you, is only a little more complicated than your dinner knives. You wouldn’t want to wipe down your dinner knives with a dirty shop towel and risk a chunk of sandpaper grit scratching them, or risk leaving behind a gross residue. But a disposable shop towel, paper towel, or clean cloth is fine for cleaning them. Maybe a q-tip for smaller spaces.
Polishing cloths have (minimal imo) value in handling heavily polished knives, those that have been taken to a very fine aesthetic polish. Not a typical concern.