Another good tool for working on pickguards is just a Stanley knife blade held in the hand (without the "knife" part).So far a dremel has worked well to reshape, using a grinding attachment to get the angle around the edge somewhere near right. With some luck some fine sandpaper and a bit of a wet sand will clean it up to an acceptable state.
It can be used as a scraper and affords a lot of control if you looking to remove a little bit at a time. Actually, you'd be surprised how much material you remove quickly as well. They're good for both fine tuning bevels or heel and vibrato cut-outs.
FWIW, the plain old blade has a plethora of uses doing this kind of work.
[Edit to add: Fine sandpaper used dry then wet will clean up the new edges nicely. You can even use a bit of polishing compound after.]
Like Simon, I was going to suggest a sanding drum on the Dremel for widening the control cavity. Definitely less risk of accidental or incidental damage.
BTW, that first fret is #@#$^ mess! (but you probably knew that already)
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