The vet I worked for cleaned sheaths with warm water and chlorahexadine solution (the blue stuff). The chlorahexadine is less drying than water so the tissue didn't get irritated. We always sedated them first and usually did sheath cleanings along with anohter procedure such as teeth floating.
My newly rescued gelding, on the other hand, has a horribly dirty sheath. My barn manager told me she starts cleaning her boys when they are foals so they are used to it when they are older. I told her I have a 1250 pound kicking giant and really am not ready to have my head kicked in. Plus I told her I was having the vet out to float teeth next week and I'd have it done then. Well, the next day I noticed his penis looking all clean and shiny. She had cleaned it after I told her to leave it alone. She only did one side, though, so I still have to have the vet come out and do the rest of it.
Maybe some people just like cleaning sheaths more than others...makes ya wonder.