Couple of things.
1. I'm bummed to hear there are issues with the petteroids, but better to hear about them now so as to make an informed decision rather than later if I get a dog. Is the consensus that the petteroids themselves are bad or just those from certain suspect manufacturers? What are the chances of getting a decent shape original Petter in the Northeast?
As for the Gib key, it sounds to me like you are going to have to drill that thing out in an attempt to loosen it enough to remove it, then dress up the key way and replace it with a new (and also dressed) key.
Is the gib key just a straight key or does it have a profile on it to make it bind harder?
Perhaps you can drill it, tap it and put a slap hammer on it and see if you can send enough of a shock to it to pop it out.
Good luck, watch the knuckles.
Robert