Unless you are going to be spending a lot of time on your back with your legs waving in the air, I do not see that a sheath has to be tight at all.

If the function of the sheath is to protect, firstly your leg and secondly your hose, from any accidental cutting, then all the three states you quoted would, to my mind, be viable.

There is always a danger, regardless of the tightness of the sheath, of damage to your hose. The only way to mitigate that would be for the sheath to be made to go higher up the handle.

Regards

Chas