Hello,
I am a little surprised that blasting operation has increased the internal diameter of the head. I am wondering if you can see some uneven abrasion marks on the inside?
To fix it I certainly would not do any welding to the frame. I also would avoid removing any further material.
I’m not sure what workshop equipment you have access to but I would do the following. (you need access to a lathe)
Take the headset cups that you have measure the OD and then the ID of the head tube. Then work out what the difference and what you need extra on the cup.
Put some bar in the lathe and make a hole in the centre so its a super tight fit on the cup (the part that goes in the head tube). Then part of the right amount. The heat it up and insert the cup into it. Once its cool, put it all in the lathe again this time holding the headset cup and machine down the added sleeve until you have the right OD. Then bingo!