Taking the edge off with a strop or high grit sandpaper sounds like it will work
Yes it will. I've had to do it on a number of chisels and it takes no time and works really well, transforming how comfortable they are to use1.
(maybe I'm just doing it wrong).
Interestingly, according to at least one noted woodworker (Toshio Odate2) you are doing it wrong ^_^ But within reason for Western chisels I see no reason not to make them more comfortable for uncalloused hands to hold, if for no other reason than you can then hold them in nearly any way, and then manipulate them in any direction, without risk of a slice.
When paring a dovetail or tenon what is the proper way to hold the chisel? (Ideally so my guide hand doesn't get sliced up)
IMO this is really impossible to answer in just words, and anyway it varies from person to person so a written description won't do the subject justice.
I suggest you look at a few experienced dovetailers working and simply mimic what they're doing. Frank Klausz would be a superb person to begin with3.
Videos are great but it would not be a bad idea to review a few good hand-tool books for the basic, or textbook, grips. But once you get to doing this — with your chisels, in your hands, at the height you are working at — you will modify the grip as you go to suit your needs. So to a degree the textbook grip is just a starting point, as you'll see in videos of experienced pros working.
1 Just a few passes with 220 grit works well, but really it's up to you what to use and how far to take it since they need to be comfortable to your hands, nobody else's.
2 This was related by Mike Pekovich in one of Fine Woodworkings podcasts.
3 Not just for this, but also to see how fast you can saw dovetails (nearly unbelievably fast BTW).