I don't believe that you would need to lathe anything if you go with the inserts. I pressed one in because my tubing cutter created a ridge that a rat tail file would have fixed if I had to do it again.1.)The Circle Track Shocks you mention as an option. (I'd have to buy the 7" ones per your OP). S7G-5555
2.) I do not have easy access to a lathe and the shops I have done work with in the past would balk at machining the insert.
I know your pictures show the insert vs the koni. Do you have a comparo of the insert vs the S7G? I"m curious to see if the shaft difference is also so big. I agree that the insert is the better choice, but it appears I can save approximately $200 in challenge budget with the CT vs insert. That's enough for a complete bushing redo in the rear irs. Or a new JY explorer/mountaineer pi motor on half price day. (which dumps 100 lbs up front.)
I thought more about it last night, the spring should help keep the shock inside of the cut off sleeve fairly well and with the non-mcpherson setup we do not get much side loading at all.
Which brings me to another point, I know MM and you worked so hard to put the monoball up top, the only time these are needed to me is on a mcpherson, since you get a lot of side loading and you set camber by the strut location. You need the ability for the top of the shock to rotate while still holding it laterally against high forces.
I think the CT shocks are a trap but that's just my opinion.