CMAN, you are spot on. After some research I found the frame is a Sears frame made by Puch/Austro-Daimler in Austria. So for the time being I used a shim in conjunction with a retaining compund as suggested. I would have gone the Chris King route If the frame was more valuable than a CK headset. Here is a pic for anyone interested.
By the way the headset cups are not budging until I am 100% ready to take them off, gave them a good

tap tap tappy (Used the DIY Home Depot press). Thanks for the help guys, the input really helped. These guys provide many interesting applications.
http://zemanmfg.thomasnet.com/item/a...024?&forward=1
Originally Posted by
cman
Could of been done or could be original. According to Sheldon's crib sheet that size is closet to an Austrian size which were imported by Sears and others.
http://www.sheldonbrown.com/cribsheet-headsets.html
There is probably a way to shim it but I don't know the proper way. The other option is go to a local bike coop and dig through the frames and parts to see if you find something similar.