Thanks again Hawkze!
I decided to try the rivet nuts before taking any drastic measures and cutting more into my frame than need be. I ordered the following from McMasterCarr on MOnday and had them on my doorstep Tuesday morning:
96349A815 - M8 rivet tool - $25
Manual rivet nut installer. It was cheap but it only does M8 rivet nuts.
95105A191 - Zinc coated M8 rivet nuts - $5 for a pack of 10
I thought about stainless but I decided to go with zinc coated to try them first.
I also replaced the M8 screws with stainless hex heads so as not to have as much of a problems getting them out down the road if need be.
The body of the rivet nut was bout 17/32" so I used my 1/2" cobalt drill bit to open the existing hole up and then slowly massaged the hole bigger with an aluminum oxide tapered piece in the die grinder.
I used the installing tool & mandrel to get the rivet nut in position and pull it down. I torqued it to about 30lb/ft before installing the sway arm bracket at 16lb/ft. It didn't budge one bit.
All-in-all it went very smooth. Time will tell how long they hold up or if I should have gone with stainless.
After sizing the hole. That boogar you see inside is actually the broken/bent nut that is still welded on one side. I just beat it up until it was out of the way for installing the rivet.