Personally I would just drill it out. The ring terminal itself is not the bottleneck, but the surface contact between the bolt/nut/mating face and the ring terminal is the bottleneck. Drilling it out and putting it on a larger bolt should increase (or at least not significantly decrease) the total contact area.
If you use a step drill bit, you can cleanly drill it out and chamfer the hole at both ends. Makes a very clean, even factory looking, hole.
That said if the hole is too big, the ring terminal has to be replaced. Manufacturers of 300+ amp alternators will void the warranty if an improperly sized terminal is used. The resistance created by the loss of contact area from the oversized hole can actually melt the stud or start a fire.