Removing the pan is the best approach. It gives you better access to the plug to remove it without further damage, and any shavings you create can be cleaned up better. Most auto parts stores sell oversize-thread plugs that self-tap as they're turned into place. Just be sure not to strip the oversized plug. Run it in and out a few times with plenty of lubricant to burnish the new threads and avoid galling them.
On pans with really badly-stripped threads, I've brazed a thin nut to the inside of the pan for the plug to screw into.
Jerry
Last edited by Hotrod Lincoln; 11/23/2011 4:11 AM.