If I'm following this thread correctly it sounds like best solution would be to find the right flywheel. Enlarging the bolt holes from 7/16" to 1/2" and installing dowels to match the crank is machine shop work, and many engine shops aren't even equipped to do this - You may need to go to a shop that works on big farm or road equipment. And they will probabably want you to bring in the crank too. The dowels have to be sized correctly because they are an interference fit to help keep the flywheel from loosening.
It might be worth a call to Precision Engine Service in Waxhaw NC (704) 843-5477 for help in locating a flywheel. These guys still do a lot of late inline engine work and have many sources for a lot of stuff. E-mail me off-list and I can maybe send you some other contacts closer to you.
