Wow... That's horrible man. A machine shop should have caught that - unless they caused it during the machining process at some point.

Those stop leak type products can work, surprisingly, but I'm with you in doing it correctly. You might be able to find a good core block and make the machine shop re-do the work on the core block for free, and just swap everything over. There are also specialty welding shops that would weld the crack for you. There is also a process called pinning (probably the same thing you called stitching) that works. All just depends on what YOU want to stick into it effort and $$$ wise.

Curt Shambeau
87 Mitsubishi Montero SWB (Turbo G64b wideblock conversion soon)