I have an "Eklind" vertical milling head mounted on my Hardinge TM. The Eklind mill uses B3 collets modified by grinding .050" off the ID of the collet for one inch of the drawbar end of the collet. I bought a set of B3 collets at Cabin Fever. I am trying to come up with a method to remove the .050 step in the spindle rather than modifying the collets. I do not have an ID grinder. I do have adjustable reamers in that size range, but hesitate to use them.
I'm not familiar with that particular collet, but if it's not unreasonably long, there's no reason why you can't bore the spindle, using the power feed on the quill. . You'd mount a proper boring tool in your vise and locate the tool so the cutting edge is on center. Size would be controlled by either the table or saddle -- depending on how the tool is oriented. Each thou reading of the dial will remove .002" in a setup like this, so use care. It's not a job for someone that doesn't have much experience, but it damned well can be done, assuming the spindle isn't excessively hard.
I strongly advise you avoid using reamers or other such tools, You have no control over what they do, and are likely to screw up the concentricity of the spindle at the point of alteration.
I only need to make a .025" cut, so cutting the spindle in half is probably not an issue. Making the mill a lathe as you suggest sounds like the best bet. Tramming the head to the table with the accuracy required will be a challenge for me.
As far as I can tell, the step is in there to discourage the use of a standard collet.
Thanks for the help. Ill let you know how it goes when I work up the courage to cut (gulp) the mill.