Maybe soak it in some moisturizing lotion? Chances are, since it is cracked, it'll never be uncracked; however, if the leather is not dried out, it should be a little bit more supple and fill in the gaps of the cracks while also looking a little better. Anyhow, just an idea. Overall, the metallic portion of the knob looks leaps and bounds better than it did before.
If you do go the LS route suggested, you should watch Tom's Turbo Garage on YouTube (also has a website for the car, v8miata.com with lots of details); he has a build series where he takes an NB and does an LS3 build; very nicely done and very detailed videos. Even if you don't, they videos are still entertaining to watch IMO. Also, even if you don't do the LS swap, I'd find an LSD for it (some of them came with an LSD, I just forget which ones did), it'll really help the handling (but, you knew that already and were planning to do it so this is just wasted text you're going to ignore - sorry, just excited for the new project as I wish I could get unburied from mine and start on something new but still have a long way to go).