Yeah but given that even if you had a US sized workshop,
you'd likely take on this kind of project anyway and you appear to relish the challenge of getting the last ounce of capability (and there's a fair bit more capability to squeeze out than many who are happy to provide the 'standard received wisdom' about mini lathes allow) out of such an unlikely candidate, I'm not your sanity needs to be questioned.
I would always willingly take on a project like this if the resources to finish it were there and my skills would allow it, otherwise I would walk away and leave well alone. Yes, I enjoy the challenge of proving that something can be done with that others would define as scrap metal.
Heck, I have taken on bikes with such damaged frames that most would scrap them and rebuilt them to "as new" just to prove it can be done, which has become somewhat of the normal thing for me these days. You need to see the frame I have just taken on... Man is it bent! By the time I finish with it, it will look like nothing ever happened to it. It is in MK at the moment with a friend. Since I will be in the area soon, I will grab a photo for you.
The way you talk, it all seems more about the journey than the destination and that's perfectly rational.
This lathe project is not about the journey. It is more about pushing understanding of the patform beyond what is considered the "accepted limit" in terms of capability and usability yet doing so by going in a different direction to what most would consider "normal".
Lateral thinking forms part of that process. It is a key skill that is somewhat uncommon in todays world but it is with that very skill that many things can be achieved which others would consider not possible. My mantra? "there is no such word as "impossible" only a series of challenges to overcome (Within reason!)"
If you "know how to ride" a bike properly, maintain it as it should be and understand the handling, the only "risk" to it is in the way you ride and the risk posed by outside forces. I can also say from experience that at 48.6mph (qualified via GPS and a radar gun) a Raleigh Chopper that is perfectly maintained is exceptionally stable and easy to handle, even with a slick rear tyre. No bike I ride ever goes anywhere unless I am satisfied it is 100% to my own (high) standard of maintenance and function.
I, honestly, have more worry over "plastic fantastic" (AKA Carbon Fibre) bikes myself. No crash worthiness whatsoever given they just break up whereas steel bends and absorbs the shock loads leaving a tell in the material as to the forces involved.