Franklin,
That's an excellent start you have there ! Your certainly well on your way to a pro quality sheath.
Like anything experience and practice will help you refine your technique and improve the end result.
There are commercially made chisels for cutting slots like that and may be worth it if you plan on making alot of them. That said though better results can easily be had with a utility knife and a hole punch.
Punch two holes and cut the sides with the knife. At this point it wont be "perfect" but will be pretty close. To take it to the next stage of refinement use an edge beveler like this-
http://www.tandyleatherfactory.com/en-usd/search/searchresults/8076-02.aspx
and go around your slots front and back to take off the square edges and make them rounded. And finally burnish the inside of the slot to a smooth shine just like the welt and you'll have perfectly finished belt slots with no fuzzies.
For real pro results all edges should be treated just like this IMHO.
Your stitching looks VERY good ! The one thing that really grabs my attension though is where you melted the thread. I do this also to keep the thread from pulling out and I think your technique is good you just melted more thread than necessary. When I begin my stitch I start in the second hole from the back side then go through the first then continue around the welt. So now I've got my "starting tail" of thread at the second hole from the top. When I get to the other end of the welt I'll stitch the last stitch twice then go back around the welt to the beginning completing the stitch. Now my stitching is completed at hole number 1 but again I'll stitch that first stitch again and pull my "ending tail" back out hole number 1. Now I'll snip the tails of about 1/16" from the leather and melt them in just like you did. This way my stitching is locked in but my "melty" parts are teeny tiny and hardly noticible.
Leather is a pretty difficult material to cut. What ever you're cutting with it's imperative that it's SHARP. I usa a standard run of the mill utility knife with a quick change blade and got a 100 pack of blades sitting on the bench. As soon my blade isn't giving a perfect cut I'll change blades. A sharp blade will leave a smooth edge on the leather helping to make burnishing a snap.
I agree with Dwane about the rough side of the leather showing to a certain extent. I've made a couple with rough side showing on the belt loop but keep in mind the rough side needs to be treated just like the smooth side. Dyed, edged, and sealed. Also cheaper leather can be pretty darn fuzzy on the back but it is possible to sand it smooth. All I've used to this point is the cheap stuff but next time I get leather I'll pony up for higher quality.
If I was gonna make a sheath just like you have here with a two piece back I'd feel I had to stitch the entire perimeter of the back and around both belt slots. Would it be a sweet, rockin, attractive, top quality, sheath... Yup. But it would also create quite a bit more work than the way you've done it here.
To make this a crossdraw just change the shape of the back so the belt slot on the spine side is down near the center of the welt. It should work just fine with the slots at an angle just be sure to make them long enough to compensate for the angle.
Take care buddy, Josh