I have been very interested in this discussion, and I do hope that it has helped ClareAB.
I take the points made that it was probably a German Army knife, used for mundane purposes ; and that some people are simply collectors. I still wonder if its sale is illegal.
I do see that it is not Clare's own call, but in a loving marriage, the opinion of one's spouse is very important. I also imagine that being left such a curiosity by a step-father may have indicated a loving & trusting relationship between them. Calling it an 'evil object' may feel disrespectful. So it seems to me that finding a way both to acknowledge both of these views is important. The current legal situation may be one way of doing this, with the help of an understanding Police Officer (and they are, in my experience)
So, my personal view remains that it would be best handed in at a police station. The police are very sensitive to this situation - I personally would talk to the local PCSO about where & when best to hand it in.
I hope, ClareAB, if you feel able, that you could let us know if these thoughtful replies have helped you at all. Whatever happens, you have done your best.