@slimpickins, I am no expert or professional mechanic so take this for what it's worth (a little less than 2¢).
For me, replacing that pinion yoke is a no-brainer. You've put the time and effort into disassembling the rear end this far so installing a new part should fix the problem forever.
Even if you spend the time to smooth the groove, the sealing surface is going to be quite a bit smaller than intended for the stock seal. You might be able to find a seal for a smaller pinion yoke but it likely will still leak.
Without 'restoring' the truck, keeping it alive seems like a better deal than scrapping or selling it. If you plan to sell the truck (considering the current market for used vehicles), do what everyone else does and re-assemble it and truthfully tell the buyer you just put in a new seal.
You could install the seal proud of it's normal location so the lip of the seal rides just in front of the groove. There's a good chance the seal would work but might leak around the edges of the metal part.