How efficient is iron smelting ?
there are two ways to deoxidize iron oxide, one is via CO as you discuss but another preferred method is heating it in a vacuum. when it is molten, the oxygen will boil off. your best bet may be using that method. in fact you will likely get a better quality melt using that methodology. That is the methodology used in the refining of high quality stainless steels and nickel alloys. VIM/VAR steels are some of the best available. (Vacuum Induction Melting/Vacuum Arc Remelting). By the way, Vacuum induction melting is probably one of the most energy efficient methods there is. there is no heat loss due to CO being bubbled through the melt (nor any bubbles getting trapped either.). there are also other things you can add to the melt to tie up oxygen such as aluminum and titanium. these also preferentially combine with carbon creating hard inclusions that are very wear resistant. making steel is not the same blacksmithing art it was even as few as 75 years ago. a lot has been learned and a lot has changed. don't let yourself get caught with blinders on. use what you've got to it's best advantage.
I suggest these websites for further research:
http://www.asm-intl.org/ (this website has a LOT of information, but you need to be a member for access. Post-grad student memberships are relatively cheap. $25 gets you membership with TMS, ASM, and ACerS, which is one heluva deal, asm membership alone is $107 which is a heluva deal all by itself.)
Feel free to contact me via e-mail if you'd like to discuss it further.