Yup, the SNK yellow topped rotaries that were in Ikari Warriors among others.  Although there were only a few rotary games, a rotary stick was one of my requirements when I first started.
When you say "increasing the size of the actuator", do you mean the stick or the microswitch?  The stick has a round shaft with a plastic shell around it that actually makes contact with the switches.  I was sorta thinking that if I found a plastic disc that fit, I could slip that over the shaft and increase the size slightly.  That sounds similar to what you are saying, yes?  That might work, but I was hoping for something more "arcade quality".  Swapping switches would be a more permanent fix that wouldn't be as prone to maintenance.  I could certainly try tape or heat shrink, but I don't think they would last very long.
Second question...not nearly as important to me...
The other thing I was wondering is about 4-way operation.  Since this has a square restrictor gate, that is located on the top, can I simply block off the corners physically to make it a 4-way stick?  I was thinking some kind of device that dropped pins into the corners to keep the stick from actuating both direction switches at once.