Thanks to everyone for replying.
Bruce - thank you for all the information! This was exactly what I was hoping for. I planned to ingest as much information as I could and make an informed decision. To your point on philosophy - I compare most things to guitar history and as it's been said, these aren't ancestral blades or swords of any singular importance on their own. As a group, they are important relics of a time period, but quite modern and manufactured in fairly great numbers. To me, this feels like a mid-to-low end Fender Stratocaster from the early 2000's. Interesting, and yes, a piece of history, but if it's unplayable and just sitting as a rusty heap in a climate controlled guitar case, it's not really doing anything for anyone, apart from documenting a history of it's own abuse.
To take that to an extreme point, to me, this sword has been mistreated and unloved since it left the hand of the soldier who carried it. Not restoring it, even slightly, feels like we're honoring the history of its captor rather than it's original owner or maker.
On a different note, it does appear that someone at some point has indeed taken sand paper or a file to the blade... and also possibly hacked down an out of control palm tree with it at some point. I don't think leaving it as-is serves anyone. I don't want to make it look new, but as I said in the original post, there are things that could be done to salvage an otherwise poor (in my mind) example of these swords. It can only degrade further, in opinion, left as is. It wasn't expensive, the numbers don't match, and there are missing pieces and actual damage.
For the saya, I'd almost prefer it sanded smooth and coated in oil, rather than repainted. Or, to use another guitar example, there could be an argument for a purposefully "relic'd" look. As in, restore/repair it as much as possible, protect it, paint it, then "age" the paint to look as it is now. Trust me, I heard most of your gasps all the way over here.
I removed the koiguchi last night, as it was was loose anyway, and it appeared to be evenly coated in something reddish in color all the way down the inside. Is this possibly a now dirty wax/protectant or just more surface rust? (I can attempt a photo if that helps)
The blade and the saya are the most problematic areas. Everything in the handle feels and looks great and appears accurately aged, but quite dirty. I only want to disassemble it to clean it thoroughly and document the pieces for my own edification and education. Also, this seemed like it would be a decent chance to clean/repair/sharpen/do whatever I end up doing to the blade in a more complete fashion. If you look at the photos, you can see rugged attempts at restoration/sharpening near the habaki. Clearly it wasn't removed and they tried to avoid it.