I opted to use a dremel cutting wheel and chisel to get the locking collar off. Once that was removed I found that the inner race moved freely around but would not move freely off the sprocket shaft. Looking at the shaft closer I wonder if it is just a light rust coating that is stopping it? Can I use naval jelly on that shaft or will that cause a problem with the steel on the shaft one day? Also there was an interesting "ridge" visible along the shaft when I removed the collar. I wonder if that was made into the shaft or if the setscrew of the collar shifting on it would have caused that ridge? It looks really too uniform for that to be the case. What can I use to smooth out the shaft evenly? You suggested sandpaper but I don't I want it smooth when finished or will that not matter? I may cut the "good" bearing off of the other side but I might try a bearing puller first--looks like I can pick one up for under $50. As for a seal--the chain and inside case will be repacked with grease AND a sealant used on the edge of the case when I close it back up. I would think that grease will enter between the spindle shaft and bearing but that looks to be by design. Since there is a dirt cap (item #6 on the drawing) I suppose that unless the dirt cap gets compromised--which is what happened to me (it rusted at one corner and allowed dirt and moisture in) it will work. Thank-you for your suggestions. This sort of thing is not what I am in any way familiar with. Electronics troubleshooting and repair was my life until I retired in 2021.The locking collar and the inner race of the bearing are still there as you suspect. A cutting torch will take those both off easily, but if you don't have one, a propane, preferably a MAP gas torch can be used to heat both pieces to a orange, red color, then cooled to loosen them up to beat off with a hammer.
Sand the shaft to remove burrs. A socket or pipe of the diameter of the inside race is proper to tap the new bearings on to the shaft. Yes, replace both bearings. There appears to by a snap ring or something beyond the bearing race. The book doesn't show anything AND it doesn't show a seal. There should be a seal in the case to keep the grease in and dirt out. I don't see one, so the tolerance between the shaft and housing should be very close and no wear at this point.
The "dust" in the chaincase is not a good thing and indicates that the grease leaked out. At this point, clean the case, chain and sprockets thoroughly then use corn head grease, such as Tractor Supply Super S #00 Cotton Picker Spindle Grease