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I sent a letter of appeal, but so far have not heard back. I just talked with a Customs official on the phone today, and he said it'll be a couple weeks before I hear anything.
So...just be aware. I might still get the knife, I might not. Probably also depends on the individual inspecting it.
Update (2 months later): it's been deemed prohibited. I could pursue it at the federal level. I'm not sure what I'm going to do about it yet.
I had one knife taken by the CBSA over the years and they didn't care that you could buy the same knife from retailers in Canada.
They recently got an extra $5 million or so in funding from Harper, isn't it nice to see our taxes being put to good use....