My opinion is that a Dana axle is harder to cut but easier to maneuver because you can better see what you’re doing as the C slips over the axle.
I don’t see any harm to move the cut inward towards the differential slightly and remove more material (but probably not any deeper). However, I could be missing something crucial, though the axle will need to be re-welded regardless and I don’t think that I would spend the time welding it back up now and moving the cut unless you’re talking about going inward drastically, which I don’t think that he needs to do.
The grinder method may not be the most ideal method for aesthetics, but I also don’t think that really matters much because it is all going to be re-welded and finished when it is done. I would be careful about how much you are using the grinder on the round part of the axle where you are not welding, as that will be harder to create a finished look when you’re done, though that really is just aesthetics as well. I would use a DA sander with 80 grit sandpaper on those areas where you have removed brackets, etc.
It probably goes without saying, though I would make sure that you take a measurement of your width before you break those balls loose. It is unlikely that they will go inward or outward much and you should be able to use your cut line as a reference for where to put it back, but having a width measurement may come in handy. It may also be handy to take a paint marker and draw the circumference of your cut (and keep your reference lines for when you are clocking it, which will also create two guides to lineup when you rotate your knuckle balls.
I didn’t see where anyone replied to your question, Jackson, about best practices for measuring castor. I put an angle gauge across the knuckle bearing race area as you suggested. If you have one of those small, square angle gauges, then I would recommend putting a flat edge across the top and the angle gauge on top of that. However, I would probably prefer to have an angle gauge that has a flat straight edge built into it.
I am no expert in this and I’ve only done it twice (once on an FJ40 axle and recently on a Dana 60 axle and it was a very long time ago on the FJ40 axle), and I’m sure that techniques have changed so please watch for others advice as it might be more current and more relevant. This might be getting a little far ahead, though you can do all of the next work on the bench, though I prefer putting the axle back under the vehicle and using the leaf springs and vehicle weight with Jack stands under the axle and the vehicle at straight, ride height to form a jig to weld those perches where you want, then dial in your knuckle balls and tack weld them in place.
As others have said, you are very close. Not to throw any wrenches into the game, but you are at a good point to widen your axle if you want to increase your side stability

. I do not have experience in this area on an FJ40 axle as I went a different route to create a wider stance.