Yes, especially in the wrong mixture.
Potentially it could be useable - I can think of a couple of easy-to-do things that I think would help - but I'd like a day or two to think about it rather than answering off the top of my head. I wouldn't want to get that wrong ... :(
On this point, what temperature do you case-harden at?
Another thing has occurred to me, is there a reverse hardening process for cast iron, to remove the carbon in the outer layers?
Potassium ferricyanide is not horribly nasty, and is reasonably safe unless unless it comes into contact with acids or it gets hot - there are a couple of other things to avoid, but those are the main two.
It isn't hard to dispose of, small quantities can usually just be flushed down the drain with extra water (depends where you are - some water authorities might object, but if you live in a town or city with a large-scale sewerage system you will in practice do little harm).
Larger quantities are also fairly easy to dispose of, you add excess bleach
- but I don't know the exact details offhand, email me offlist if you need to do this.