I would agree with grinding it off as being the least risky of the two. Taking a hammer to anything cast and 60 years old could be problematic. You see a similar pin on the SM-420 transmissions on trucks with the driveshaft brake. I have always wondered about the best way to remove them. You can see it here in this picture, don't have one of the bellhousing but they both press fit.
http://www.flickr.com/photos/advance-design_parts_co/8417815389/in/photostream