I wouldn't worry much about the seals.. there are lots of replacement styles, or even a greased leather washer (riding on a polished shaft) held by a sheetmetal retainer will work effectively at keeping dirt out. This is assuming that the lube is gear lube, not a hydro transmission (you said 1964 machine). You may still need torch heat to pull the hub, since the hub may not have been removed for decades.
The primary disadvantage is needing to use a handheld drill, which can attribute a lot to rapid drill point failure.. using a steady position and forceful feed pressure are going to be to your advantage. The drum should be secured so it can't rotate. If you can clamp a bar or other steady support nearby, it would likely help keep the proper approach angle and position.
In awkward positions and using a handheld drill, it can be worthwhile to take some time to fabricate a mechanism to apply more feed force and steady positioning using a lever to increase the feed force while offering a very steady feed direction.
In this situation, even a Cole drill wouldn't be a simple solution due to the drum size and the angle of the screw, but maybe something as simple as a section of chain and a lever pressing on the back of the drill motor would be appropriate.
The masonry drill suggestion could be a good solution, and for as cheap as they are, grinding them to suit your needs should make them even more effective for your needs. I'd suggest using a proper steel cutting lubricant, not just anything that's handy and slow RPM.
With a steady and forceful feed mechanism, using a pin and high RPM (no lubricant), friction may generate enough heat in the screw to soften it, but this method would likely be more appropriate for a workpiece on a drill press.
An air chisel used as a hammer, hitting on (a hex or mating) driver, with the hub supported by a steady hard backup like a jack stand on a cement floor (not a block of wood on soil) may be enough to work the screw loose while saturated with penetrant of ATF or miracle product. Hex wrench material and some hardened drivers are likely to shatter, so, the use of some fuel hose or other protective shroud would/should prevent shards of metal from shooting out and injuring the operator.. and uncommon sense should dictate the use of all the personal protection/safety devices/apparel required for safe practices. With a series of impacts the screw may dig into the key a bit more, relieving the holding grip in the key slot, and a couple/few thousanths inch of relief would be adequate to loosen the grip of ordinary square keystock, so a stable puller could pull the hub/drum off. Having the part removed from the axle will give you more options for dealing with the screw if it hasn't loosened to the point of just winding it out (or inward into the hole).
An annular cutter just larger than the screw diameter should effectively cut away the softer iron without dealing with the hardened screw. It looks as though you'd need to prepare a flat surface *like a counterbore around the screw hole) for the cutter to start on, with a die grinder (Dremel/Foredom etc).
I don't have a source handy, but these tiny holesaw-type cutters are available for cutting thru spot welds (although not particularly deep capacity) and other purposes. Woodworkers use similar centerless cutters for cutting plugs and dowels, so cutting cast iron with a quality cutting lubricant and slow speed may accomplish the desired results.