Thanks all for the beta. Seriously made me feel a lot better about the whole situation. I was pretty down on it. I think I may try to notch it and see if a flathead driver can't work it out. Then sort of work my way down the list of more involved methods.
I can't really envision how to weld a nut to the end of the bolt... I imagine that working only if there was some of the bolt above the face of the surface. This is set just below the face.. a couple mm at least. Nasty.
Unfortunately (Dinahmoe) the engine is in the car. I decided to make some real progress by tossing the block and transmission in w/o the head etc etc. I'm seeing now the folly in that decision as it would be really really nice to have it out of the car.
I'm certainly making a list of what I'd do differently the next time round... its quite the list.

Indeed, welcome to the world of vintage volvs. Here here. I'll share my victory story... hopefully w/ a link to running 122.
Thanks all.