I would have done just what it looks like you did... Grind it smooth, radius out any sharp angles an go with it...
The bind you are feeling is likely a bit of out of round that happened to the bottom when it tweaked it... if it is bad you could releave it a bit, but it sounds like it is not that bad...
I would not try to build a hi performance engine with that block... but for what your doing it should be GREAT... :smile:KennyV