I'd reccommend using plain cotton hemming tape (not the kind that is heat bonding) it's basically just a thin (1/4 inch wide is best) strip of cotton fabric, taking you handle, a piece of 1 inch or so thick wood, planed to shape is best, coat the handle in contact cement.
Once the cement is dried, take the middle of the strip. And place it right at the bottom of the tsuba on the omote, the side of the handle that faces away from your body, if you were wearing the blade edge up, on your left side.begin wrapping each side around creating "X"s with the fabric, making sure that the fabric creates a zig zag pattern going down the length. Make sure that you DO NOT expose any of the diamond shapes that normally are part of a japanese wrap. this is very important. Once you have finished the length, tie it off, and leave some dangling. Now take a length of strip and contact cement the middle 1/3 of the tsuka, and wrap it around in a spiral, tuck each edge under one of the diamonds. once it is all held securely, and the contact cement is cured thouroughly, handle the blade alot with unclean hands, lightly rub it with coarse sandpaper now and again, basically put the pristine white cloth though a lot of abuse in a short period of time and you'll very quickly have a wrap that looks right. BTW this style of wrapi is called Hinari tsukamaki, or simply hinari maki, it is a type of battle wrap that came into heavy use during the sengoku jidai (warring states era) and was used to prevent the samegawa (ray skin) from being damaged by blood, sweat and the elements durring campaigns. actually throughout inuyasha, an understanding of the dress and customs of the sengoku jidai helps to keep you from overlooking a lot of easily misinterpereted details. Ie the type of hakama and kimono, the types of weapons, etc.