I would think rare earth magnets would be too strong to be safe. i could be wrong, but that is my gut feeling.
The magnet knife holders out there are very simple and do their job extremely well. There is no damage to the knife and they are commonly thought to be the best way to store knives from a safety, hygiene, and convenience point of view. There really is not much that can be done to them to make them better.
Aesthetically your idea sounds great. I am pretty sure I have seen wooden magnetic knife holders (at Williams Sonoma maybe) that were all wood with the magnets inside. They looked very attractive. I think as long as you find the right strength magnet (not too strong and not too weak) then you could really have something great.