Am I mad to contemplate this?
Depends...

I think an historically accurate rebuild, i.e. re scraping the ways to the original accuracy (if the lathe has an historic value) would be OK

Doing the rebuild because it would be fun to re-engineer and improve it, would be OK

But, rebuilding to get a better lathe, would be madness. There are a lot of lathes around in reasonable condition for not too much money.

The dovetail face itself seems flat though (how would I check this?).
You could probably make something like this:
http://www.google.com/patents/about?...BAJ&dq=2761217