We know that with new original bearings and proper size V-belts, the Atlas mills ran OK. AFAIK, you don't know for certain what the bushings in the countershaft hanger are. So my suggestion would be to replace the bushings and the belts with OEM parts, and start from a point that we know worked.
On the Depth Of Cut (DOC) issue, I should have said at the beginning that DOC isn't perhaps as well defined for milling cutters as it is for normal lathe tooling. On a lathe (most of the time), you have a nominally single point tool with not much width in the longitudinal direction. So DOC is pretty well defined and how large the cutter or insert is doesn't much matter. So there are only three variables, DOC, Feed, and SFM (related to work RPM and diameter). With an end mill, face mill, or slabbing mill you have a fourth factor added, which is the width or circumference of the cutter actually engaged with the work. If you are using an end mill (which you are) or a face mill, then I think that most people would call the direction where you show movement of .010 to .015 the DOC. Which if I understand your sketch would be set by moving the table and work toward the spindle. And the 1/8" dimension would be table or knee lift. On a lathe with milling attachment, the .010" to .015" would be carriage traverse and the 1/8" would be milling attachment lift or drop. If the arrow indicates the direction that the work is moving into the cutter, it is backwards. With a normal end mill turning in the normal direction, moving the work in the direction shown would be climb milling. The only movement of the end mill is rotation. At any rate, with a similar setup on my lathe, I would be using 3/8" or 7/16" instead of 1/8" if the end mill diameter is 1/2".
Anyway, my guesses as to the cause of the hot bearing is either excessive belt tension in order to prevent belt slippage or no oil getting to the shaft because the bushing isn't porous (solid brass or pores plugged or some of both.