Anyone use helicoils...? Much sadness.

Go Imperial. Tap drill for #5 .125-40 is .002"/side smaller than the od. of the existing 3.5mm thread. OD of the helcoil (dim. B) is .161 (4.1mm). Coles Notes - You'll be jut taking out the existing threads, and only adding .3mm per side to the od of the crests of the helicoil.
 
one thing to note is that OP said the threads deteriorated due to corrosion - stainless steel and aluminium alloy is a bad mix - I've had it happen on my top notch bianchi road bike where the stainless steel shimano cable end caps and stainless steel cable reacted with the alloy cable stops resulting in white powdery corrosion and paint loss.

it may turn out that the corrosion has gone deeper than what is required for slightly oversized threads.
 
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