Some years ago, I made a four way Rear Toolpost for my lathe. The raw material was a 3 foot length of 3" x 1" BMS, (declared scrap by R & D). It was made to match the four way front toolpost.
Each of the five laminations was machined differently, and clamped together, internally, by three long Allen capscrews. The fourth position was used for a dowel to locate each orientation. It carries a parting tool and two chamfering tools (front and back chamfer).
1/2" bar was ideal for making the M10 Tool clamp screws.
The base is clamped onto the rear T slot of the Cross Slide, with two small dowels to locate it against the back of the Cross Slide.
Have also made two other 4 way toolposts, for friends from lumps of mild steel. One is on a Little John, the other on a Chester Cub.
As far as I know,like me, they have had no problems. So Mild Steel will do the job.
When machining cast Iron, I position a magnet under newspaper beneath the chuck. Aftrerwards, removing the newspaper allows the dust to be disposed off quite easily, and the lathe needs almost no cleaning up.
Howard