I had my 860 gear box all apart a bit over a year ago. There is not one kit that gets you all of the parts. I had to get some parts from this site, some from another, and a couple of bushings I got from McMaster-Carr. It is not clear from the descriptions of what parts you get in the kit. Right now my memory is foggy on regard to exactly what I had to order.. I will try to look got some information and get back to you.
The sector shaft bushing wear, that allows the sector shaft to move front to back, which ruins the seals, then ruins the new ones you put in. I did have to make a puller to get the bushings out of the sectors. I still have that puller, you are welcome to use it if you need to replace those bushings.
The upper bearing, under the steering wheel was bad on mine, I made a new one for that. I did not like the one I bought for that spot.
The lubrication in that gear box is inadequate, The upper bearing in the box it above the oil fill level. SO it never gets lubricated, this the wear you see on your steering shaft. The bearing on mine, like your lower photo, was rusty from lack of lubrication. I did clean it up and put it back in. It is not a race car, and it is not in a position to catastrophically fail and cause a crash. With adequate lubrication I figure it will last longer than I will. You probably do not really need to remove that lower bearing with the weld. YES, it would be nice to do it right, but, it may not really be necessary.
My gear box is now filled with "Super S #00 Cotton Head Spindle Grease". I got from tractor supply. I drilled a small hole in the tube that leads up to the top bearing. I fill the gear box, from the bottom, with that grease til it oozes out that hole. The give the upper bushing a squirt.
It works so much nicer now than it did before the rebuild, even with the questionable bearing left in place.
Good Luck,
John