I hesitate to mention this because I don't know exactly what the problem is.
I am assuming that the hole is a through hole into the water jacket because you are working on the block. Yes, a torch will work but you haven't got one. Cast iron will not oxidize as fast as steel when one hits the oxygen lever. I torch out steel pipe from iron fittings all the time.
You said there is only a small piece of the tap and it is near the end of the hole. Let's assume that the last 1/3 of the hole is expendable. Let's also assume that the cast iron surrounding that 5/16th hole is about 1" thick. That's reasonable because the pattern maker would have beefed up areas around tapped holes.
You could take a piece of 1/4" pipe (that's a nominal size, actual size is over 5/16th" on the ID), cut it to fit between the inside of the water jacket and something solid. If there is nothing solid, put a piece of heavy flat bar in there as a bridge. The pipe gets centered on the hole and is tight. Now drive the tap through the cast iron into the pipe.
Install the new stud with Threadlocker or epoxy. I think 1/2" of thread in the cast iron would be enough but you will probably have more. I don't think you will have a big divit on the back side. Just four small thread tear outs. If you are lucky the only damage will be to the tap as it shatters into small pieces.
If you are not lucky, and you cave in the whole side of the water jacket, will you forgive me?
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