“Not keen on Malcolm’s idea of putting more weakness into the spindle taper by adding slots”.
You are right of course, this was just an attempt to indicate “best bodge”. Incidentally though, it is fairly easy to create circa 1mm wide slots in hardened steel using a thin grinder disk in a circular saw, with improvised wooden guides (avoids abrasive on your lathe or mill). Proper rectification will require tricky precision work, with success dependant on available resources and skills.
So a my suggestion is to check if a “next size up” ER collet nut has a suitable thread diameter to allow for an intermediate sleeve. ER nuts are readily available and of suitable quality. Modification or an adapter would be necessary to provide the flat collet clamping surface, but otherwise much of the precision spadework would be already done, and what’s left is easier. Now either shrink on a sleeve as suggested, or keep the existing thread and make a sleeve that fits it.
The shrink sleeve has the advantage that the split will be tightly closed, and thus directly maintain the hoop strength of the original configuration. However, given the split, there is considerable risk in turning off the thread, though less if it can be done by grinding. Also, any mistake in the interference fit can allow the sleeve to pull off with the tightening force
The alternative is to make a sleeve with an internal thread having as close a fit as possible to the original thread to contain the split. Then it would be fitted with locktite. Think of locktite as cast in place Perspex, with micro keying but weak adhesion. Therefore the fit of the thread needs to ensure good metal to metal contact to provide the predominantly path for the high tightening forces. The locktite can only stabilise things, it is not a dependable structural element for the level of forces necessary for collet closing.
Now, either way, the spindle with the fitted sleeve can be set up with the taper true, and the sleeve threaded to fit the ER nut. This will need to be modified for flat contact with the collet, or perhaps just a turned adapter could do the trick without having to machine the nut. Also worth investigating would be the versions of the ER nuts with integral torque reducing ball race. If dismantling this by removing the balls proved possible, an alternative custom piece could be turned up. Dismantling would entail drilling out the plug closing the hole used to feed in the balls, then blow them out with compressed air, doing it all inside a deep poly bag to prevent escapes. Then reassemble with the new part, which would ideally be correctly hardened.
With some luck, either of these modifications would provide near original concentricity, and near enough original strength.