I like the idea of getting it welded, as a cheap option. Make sure any excess weld gets angle grinded down and it's all flush with the rest of it. In fact what would be a good idea, is that there is a V shaped groove made for the weld to sit in. A bit like channeling out a crack in the wall before filling!
Top tip I was given here when I last changed my pipes, was to keep squirting WD40 or equivalent into the bolts and all the other rusty parts that need undoing. And if you do ride the bike, the WD40 when hot makes a good air freshener (joke) No seriously, Do this everyday for about a week, be generous and it will make life a lot easier when it comes to undoing it all. You don't want one of those exhaust studs snapping off in the head leaving you with having to re-tap the hole, or worse re-place the head.
Good luck and have fun (:-})