On the advice of the good people from riggingandhardware.com, I tried using aluminox to fill the groove on the old sheave. Total cost: $12! FYI, I couldnt find a single supplier who could make sheaves that have a 7/16 bore, so this was my only option besides going to a machine shop (I called 3 places, and never got a call back).
Unrelated: I ordered new halyards from the aforementioned rigging shop on 1/3/11 and they showed up at my house on 1/4/11. Talk about excellent service!