Thank you @AndyGSi for following up. I will update once it’s done.   Thank you @Neverenoughwatches for your response. You’re right the original plan was to cut off the ‘lip’ lowering the movement down. However after@AndyGSiwise observations I realised that this would cause the movement slipping through the hole after the lip/ridge was removed, and widening the diameter of the lip/ridge would achieve the same result.

I understood it that the op wants to reduce the lip height, in order to lower the movement in the case, nothing to do with the diameter. 

In the end I got a balance from a donor movement. Fitting the collet back on is not that difficult. If you are not confident, get an old scrap balance and practice on removing and refitting the collet. 

As it's so close to the 25.6 stated you should be able to run a fairly smooth sanding drum around it.

Thank you @RichardHarris123, @AndyGSi for your ideas. You’re right, sorry for confusion That’s a good point, I forgot mention that the internal hole has three different diameters: 27.5, 25.7 (middle ridge that I’m trying to cut) and 26.1 It doesn’t go through the hole because of 25.7. I think I can align and fix with clamps once the ridge is removed 25.7