This is a modification of a device I made to slit plastic trim down in width. It works the same way, just doesn't cut clear through the material being cut, in this case insulated wire. You can see all of the pictures on my Flickr site. I will only have a few in this instructable.
Once you've seen the Flickr photos you can see how the setup needs to be changed a little to strip wire. The main differences are the cutting depth and angle of the blade and the depth of the slot.
In this picture I illustrate four variables. A+B equals the diameter of the wire you are trying to slit. Adding the blade between them later on will provide enough play for the wire to pull through easily. C is the blade height. For trim, the height can be big because you are cutting clean through the trim. For wire the height is very low, the thickness of the insulation you are slitting. D is the slot depth. For trim slitting the slot shoud be deep to help hold the down force device in place and to protect your hands from the blade. For wire, the slot should be slightly less than the wire diameter. This way your down force device will make contact with the wire as you pull it through the slot.
Step 1: Construct the Slot
I use a piece of the wire I'm about to slit to create the jig and basically build the jig upside down. Lay a piece of the wire to be stripped on a flat surface. Sandwich the wire with two pieces of the plate material. The wire itself produces a gap between these two plates. Then place several thinner plates between the two you just sandwiched the wire with, but set these on top of the wire. I try to use an even number of thinner plates so that later I can place the blade right in the middle of the slot by keeping the same number of thin plates on either side of the blade. Use enough thinner plates to produce a slot that is just slightly wider than the wire so the wire pulls through the slot easily, but not so wide that it won't stay centered on the blade.
I just got lucky and had some aluminum shims sitting around and they just happened to work great for this. If you need to acquire the materials then a trip to a hardware store or the hobby store should produce the materials you need. If you want to use what you have then just get a little creative. You can use any thing that is consistent in thickness and is easily handled. For one of the wires I stripped my aluminum was either too narrow or too wide when I tried to create the slot. I took an old hack saw blade, snapped it into 3 to 4 inch pieces and used them to create the slot. They worked great and just went in the trash when I was done.
Keep in mind that the image below of the trim slitting jig. The blade is obviously too high to slit insulation, unless you are trying to cut the wire in half, which I don't suggest. I would just need to drop the blade down until it sticks up just enough to cut through the insulation and exposes the copper. You can see here I have two 1/4" thick plates sandwiching the blade. That's because I had 1/2" trim that I was slitting. If I have 1/4" wire then I would use two 1/8" plates and so on. This slot is also far too deep to slit wire. It prevents you from using a screw driver handle or something to create down force over the top of the blade. For wire, this slot would only be only slightly deeper than the thickness of the wire you are stripping.
Step 2: Place the Blade and Clamp
Don't worry too much about cut depth just yet, we just need to get the assembly in the vise. Once you have the blade in place pinch the stack of plates together and get it in the vise with only enough clamping force to hold them there without dropping to the floor. In this condition you should be able to raise or lower the height of the blade to where it needs to be for the thickness of the insulation on the wire you are going to strip. You want the blade to just cut through the insulation and not into the wire itself. That would dull your blade quickly and will make getting the wire to pull through the slot much harder. The blade will just barely be seen because it only sticks up above the bottom of the slot enough to cut the insulation.
Now I wish I had taken pictures of the wire stripping setup, but I didn't. This picture shows trim that I just started to pull through the slot and past the knife. If this had been wire it would look just like this, only you wouldn't see the blade sticking up past the wire or you would be cutting the wire in half. The other thing that would be different for a wire setup would be the position of the blade. You want the blade at he exit end of the slot, not in the middle of the slot like this trim setup shows. You'll read why in the next step.
Step 3: Start Stripping Wire
To make the job of removing the insulation as easy as possible you want the blade to just cut the insulation and not the wire. As you pull the wire through the slot you can tell if the wire is getting cut. It will be MUCH harder to pull if you are cutting the copper and you will feel the wire stutter step as it pulls through the slot as the blade skips along the surface of the wire strands. Just try a different pulling angle or you can stop and redo your blade depth from the beginning.
For insulation that is particularly rigid it can be difficult to get the copper to start pulling out of the insulation. On one end, about eight inches, I make a slit. I then slit the other side of the wire full length. This lets me peel the insulation like a banana on one end and gives me some copper to hold on to and pull on to get the wire and insulation separated.
With some practice you will begin to see how you can control the performance of the device and make it as easy as you want. I used it to strip four different gauges of wire by using various combination's of thinner inside plates to create the slot width. One of them I didn't have the right number of plates to get the blade in the center so I just had to pull the wire through with the blade slightly higher since it was cutting the insulation off center. Worked just fine.
This picture shows the plate I used for down force to slit the trim. For wire, this would have worked fine, but I think a screw driver handle or something like that was easier to manage while pulling wire. For more extended use or larger quantities of wire I had the idea of making a more effective down force device with a hold-down clamp, see Grainger.com item 3CXA8, maybe even put a bearing in it instead of the static post. That way I could open the slot to place the wire in it then close the clamp and start pulling the wire.
Experiment a little, see what works. If getting the wire through the slot is difficult you may be getting the wire snagged on the entrance of the slot. If you have the tools for it you might bevel the leading edges of the slot so there isn't anything for the wire to snag on as it enters the slot.
I hope it works for you as well as it did for me.