If I understand your post correctly, you're reducing the diameter of the master cylinder by 1/8"? Yes, your mechanic is right, raise your insurance coverage limit, and try to hit something cheap! You won't be able to displace enough fluid to get the brake shoes firmly into contact with the drums, without pumping the pedal, or adjusting the shoes way too close to the drums. I'd definitely advise against that fix! The first accident is going to cost a LOT more than the difference in the parts cost.
Jerry
