Don't even think about welding it. Whatever is imbedded in the bottom of the hole is going to have to come out. It's probably a piece of a drill bit, or maybe an EZ-out. I'd suggest using a die grinder and a diamond burr to try to dislodge whatever is down there, and then using the same type of tool to get the hole round enough to thread it for a plug, then drill and tap the plug for the proper stud. If I had the engine in my shop, I'd remove the head and use a drill press or a Bridgeport mill to mimimize the risk of making the situation worse. That head is fixable, but just barely!
Jerry
