Originally Posted by HillRider

One alternative to drilling and tapping the hole for a larger bolt is to thread (or push through if the threads are really stripped) an M5x.8 bolt from the inside of the dropout toward the outside. Use a bolt with a button head or pan head so it has very little thickness on the inside of the dropout. File the head a bit thinner if needed. Then install your rack, fenders or whatever and use a nut on the outside of the bolt to fasten it in place.

That way the thickness inside the dropout is minimal and shouldn't interfer with the chain or small cog the way a nut on the inside would.