I avoid leather sheaths for my outdoor knives for just that reason. Leather absorbs water and stays damp, just as you said. It doesn't even have to get wet. If you cut a limb that's green and put the knife back in the sheath, the sheath is now wet. Even wiping down the blade a few minutes later won't help much because the moisture has already been introduced to the leather. Now you have a sheath you can't use for several days. Usually you can't even tell the sheath is damp until you take your knife out at a later date and the blade is rusted.
My favorite knife has a rigid plastic sheath. Water has never been an issue.
If you already own a fixed blade knife with a leather sheath, there are ways to prevent rusting. First, NEVER put your knife away damp. After each use, dry it with a hand towel. Keep a wash cloth in a ziploc bag in your pack for this purpose. Hang the rag out to dry after using it.
Second, keep the blade slightly oily. You should own a sharpen stone kit, like a
Lansky Sharpening System The honing oil it comes with works great for this. You can keep a tiny bottle in your pack. Apply 1-2 drops on each side of your blade and smear it over the entire surface with your fingertip or the corner of a rag. Now protected, you can replace your knife in its sheath. I NEVER put my knives away dry. They are always slightly oiled.
Lastly, as soon as you get home from hiking/camping/riding/fishing take your knives inside and clean them. I wash them at the sink just as I would my kitchen knives. Warm water and dishwashing liquid. Then, rinse them with super hot water and dry immediately. Hotter water is more likely to evaporate than warm or cold water. Dry thoroughly and oil. Do NOT place the knife back in the leather sheath. Leave the sheath out to dry for several days. You can slide strips of newspaper into the sheath to speed up the process. Store the knife with the sheath, but not in it.
Following these 3 tips will keep your knives shiny for many years.
LANSKY SHARPENING SYSTEM
One more thing, if your blade happens to rust, all is not lost. There's a product called Eastwood Rust Converter. It's not cheap, but a little bit goes a LOOOONG way. Buy a small bottle and treat your rusted blade. The process is easy. Smooth the rust with steel wool, then paint on a thin coat of rust converter. Let it dry overnight. Lightly smooth it again the next day with steel wool. The blade will be discolored, but no longer rusted. Also, the chemical protects from further rust.
"I'll forget the pain it took to finish, but I'll always remember it if I quit."
~Brian Foux
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Leather Sheath Downside? 
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