Gee, your hot-rolled sounds like rebar!

I agree about stress risers at the transition.

The teflon sleeve probably won't do anything useful -- the "shock absorber" flexing effect is just what we want to eliminate with the brace. But a "semicircle" that permits attachment to two studs is a possible approach.

In fact, a more comprehensive method would be a three-holed collar fitting over the tower allowing solid attachment of BOTH the firewall braces AND the tower-tower brace. Sort of a "systems approach".