Governor bushing do wear at times. Just remember when install a new bushing only ream to needed free movement and not to where Briggs service manual specs it at. It been a long time since my last governor bushing replacement. If I remember correctly the new governor would not go into the governor bushing until it is reamed.
But trying to cut a recess for an o-ring is going to weaken the governor shaft bushing mounting as it use the crankcase thickness to support it.