Hi Prometheus

Just be prepared for the worst possible case scenario as you call it,
unless you have some diamond tooling.

The O1 or W1 or W1 steel you where talking about machining was before
hardening, and your punches are already hardened, and if you think you
can just anneal and harden HSS I do think you are wrong,

Grinding is most likely the way you will have to proceed, nothing wrong
with that, it'll just take a little longer, as far as I know that's how
a lot of the bowl gouges are made, not like some think by just milling
the steel.

And by the end of the day you will have learned a lot and that's never
wasted, just be careful and have fun

And even in the worst possible case senario, super-hard *anything*
doesn't mean much to a die-grinder.

It'll get used, one way or the other.