When you say you can't remove it, do you mean that you can't get it to, or under a drill press?

If so, I would opt for the plasm-cut hole, or do like another poster said and blow the hole with a torch, then weld in the proper sized bushing.  If you don't have a plasma cutter on-hand, personally I would go with the weld-in bushing.  I've done this route several times with great results.  If you go this route, I would recommend welding a little at a time, so it doesn't shrink and do crazy things to you.  Start with a tack at 12 o'clock, then at 6, then at 3, then at 9....then fill in between the tacks.  Don't get it real hot, and it won't shrink and twist, and move...

If it is "drill pressable", I have gone to 1 ^1/8 with one bit (no increments).  I bought a good 1 ^1/8 bit when I was building a 3 pt. round bale unroler, and it is still cutting good....amazing what RapidTap (great brand of cutting oil--I swear by that stuff) and a good quality bit will do !!