>>1389341imo, you're doing way to much.
I'd just use a steel brush (on a drill or angle grinder) to remove the red rust and leave the black rust on. Then, while the head is still warm, soak the black ironoxide in beeswax. That's how blueing / blackening was done traditionally, and it works a lot better than selenedioxide blueing.
Then sharpen it, clean the handle, soak the handle in beeswax, polish off any excess wax and mount the head. That way, the hatchet will last decades.
>Linseed oil handle until saturatedThat will probably make the axe uncomfortable to use. With boiled linseed oil, at least, saturating the wood makes it to smooth to hold it comfortably.
>Cold blue the headIf you're talking about store bought "cold-blueing" (usually selenedioxide) that doesn't work properly, since it only gives a very thin layer of ironoxide. to protect against rust, you need a layer that's thick enough to soak up some oil or wax. actual cold blueing (letting the head rust then grinding of the red rust) is superior.
>File the edge, and finish with diamond honeJust the file should be enough, unless you intend to use a diamond hone every time you resharpen the hatchet.