There is already a SB to move the generator up to keep it out of the oil.
I would think with a bit of engineering, 337, and an IA and A&P one could get a field approval assuming the local FSDO would comply.
It does not make sense to keep an old heavy generator and regulator (and not as reliable) in place when a one wire TSO'ed alternator would suffice.
Correctly stated, the Hiller is getting old, and most parts have been overhauled many times, and that in it's self is a problem.
The Hiller is not the only "old" aircraft out there that is suffering this problem.
Regardless of whom you choose to turn wrenches on your baby or who you buy it from, you will still run into questionable replacement parts. Somewhere in the mix you have to realize it is not a new aircraft and therefore can not be treated as such.
Myself also being an A&P realize that new/slightly used parts are hard to find but well worth the money in the long run. Sometimes you have to know when to toss what appears to be a good part but is out of limits just to keep it out of the system.
I am very careful about "bad mouthing" buisnesses or other A&P's when it comes to rebuilding older aircraft. Sometimes even new replacement parts aren't quite up to standards as well and I would look bad when it did not fix the problem and I had to locate another exact part to finally get the problem solved. (that statement had nothing to do with Hillers but rather older fixed wing aircraft). Yes, even in the world of commerical aviation, there are overhaul shops that are quite good at "Krylon overhauls" esp out of the Miami area. I say the Miami area as it is probably the only place that still overhauls older aircraft parts.
No matter where you locate your Hiller, its buyer beware. I think you will find pro's and con's from anyone that overhauls/rebuilds these 50's era helicopters. You do after all, get what you pay for. If you want to dump 300 grand into a "hobby" I am happy for you. Get something new or at least close to new if you can afford it. For the rest of us, its not as easy to throw that ammount of cash into the hobby and we have to keep an eye out to insure we are getting as quality machine as the money allows.
My 2 cents