I think you are already into the custom bearing range even if you got it finished at exactly 0.040" undersized. My 5J3501-5J10561 book shows a maximum 0.020" undersize bearing.
I expect the welding would confuse the Magnaflux process anyway.
There should be better cranks out there. Lots of ponies coming off to convert to direct electric start. Maybe you would consider that? Old Magnet has figured out the measurements to bore the clutch housing and get the correct starter drive and nose etc.
If you want to keep the pony, the crankshaft itself and the complete block assembly interchanges between all the D2 models and all the 212 graders so there's a bunch of them out there.
Some shops are over fussy, if you understand there will be no comeback if it brakes I see no problem in grinding it for them. Pony cranks should not be that hard to find. It might be a good time to convert to electric start and forget the pony...WA7OPY
I really want to keep the pony motor. It is nice not having to worry about a battery.
Besides I have invested time and money in its restoration so giving up now would not be a good thing.
If anyone has a lead on a pony short block with a decent crankshaft or just a crankshaft I would appreciate it.
Patrick