if the flash hole is too low, you may want to consider a new touch hole liner. i'm partial to the White Lightnin' liners, but there are a bunch of good ones on the market.
if there is a gap between the edge of the pan and the barrel (i.e. if the pan doesn't fit snug against the side of the barrel) then you have a place for priming powder to sneak into the lock mortise, where bad things can (and eventually will) happen. to prevent this, i would recommend that you put something in the gap. i've used a bit of brass shim material which i silver soldered onto the lock, and i've had good success with this, but i do keep an eye out for this piece falling off and if it were to do so, i wouldn't shoot the rifle until it was repaired.
the shallow groove will stop growing if you move the location of the touch hole (at least, that's the theory). to fill this in sounds like a welding problem, and i would defer to those who know about welding on that issue.
good luck with your Bess. once you get them going, they're a lot of fun to shoot!