I've used diamond as well as paper on a flat and both work nicely.

A few years ago I bought a small table-top Sears wheel. It is fine grain and soft and has a water trough and runs at a very low speed. It was cheap and I use it to hollow-grind and it puts a wicked edge on the steel. Final honing or stropping is all that's needed.

The machine is the size of a shoebox, plastic Chinese-made and I think it was 25 bucks or so.