Just some off hand thoughts! (I smell wood burning)never mind, it's just my head overheating!
I've also only drilled out part of a bolt just enough to get some threads and install a stud and then nut on top. Threaded Stud stays in place if future diaassembly required! Sometimes you can find a reduced shank stud for example a 3/8 thread and a 5/16 stud shank or if you have to tap larger or use a helicoil and then use a stud and the block threads will remain good for the rest of its life if disassembly required the stud stays in place.
Doubtful in your case, but if you have room on the bottom, drill it out and insert a bolt with a nut on the bottom when re-installing the head. Nut may have to be partically relieved for room on the backside. (just a thought as it's not clear in the pic how much room for such.
I would really keep a heads up and keep the drill bit centered, because you may not have much clearance when going by the intake and exhaust ports internal in the block if try to deep drill.
As a last resort if it's for yourself, might get longer bolts for the other two head bolts, make a 1/4 piece of bar stock steel, some spacer collars for the two bolts and and the one missing bolt and when the two head bolts are torqued on each end the center has force applied in place of the stripped bolt. The cross bar is on top of the cooling fins!
I would not go any further for a customer, too much time and possible future failure, etc!
In one of your pic's it appears the old head gasket was starting to leak at the cyclinder area. I would lap the head flat using piece of glass and sandpaper before test re-installing.
I also on my own eq I usually install studs for the exhaust muffler threaded block holes. (this allow two shots when removing, just the nut or the complete stud when removal later. Helps prevent bolt twist off at this area and a stud will hold better than a bolt in this heat/cool area. (use double jam nut on the stud for initial tightening of the stud into the block)