Ok. You don't want to elongate the lower hole. If you do (with a reamer), you'll have a huge hole larger than the head of the bolt. I wouldn't recommend trying to fix this with a larger washer.
If you're looking at the bracket from its side, meaning you can see the two holes for the bolts with the cable mounting points to the left, I would mill down the bottom of the bracket on the southeast corner, just past the bracket mounts. You probably only need 1/8th to 3/16 to make the fitment right. This way, you don't have to ream the bracket and weaken the point at which the bracket mounts to the engine.
If you have a table mounted disk grinder, that's perfect. If I had to guess, you probably only need to shave off half an inch or so to get the fitment right. Sorry Ken, but I think this is a trial and error procedure. I would certainly NOT make the mounting hole larger on the bracket.
Once you have the bracket ground down, I would, per Derek's suggestion, paint the bracket with a primer to prevent any kind of rust on the bracket.
Finally, if you do decide to go with reamnig the hole (that just doesn't sound right, does it?

), you'll need to get a bolt with a larger head, hoping that there's not enough fatigue on the metal over time to snap the head off the bolt - if that happens, you're in a world of hurt. Which is why I think it's better to grind down the bracket. But if you do go with reaming and a larger bolt, go with a low tensile steel, the less brittle, the better.
Good luck!
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