" I was reading about freehub body transplants and according to Sheldon's article an 8 HG body can be fitted in place of a 7 HG or UG body and the wheel has to be re-dished. I was looking at my hub and there's about 3mm washer between the cone and the locknut on the non drive side. Can I just remove / change the washer?"

Removing the washer would increase the hub offset (dish) even further, that's why the 8-speed hubs got wider, so the dish would stay within limits.

I don't think you could switch the freehub body to 8sp without added wheel dish unless you added spacers to the left end of the axle and accepted a further increase in width to close to 135mm.

Any time you switch a freehub body yu'll want to take all of the right-hand axle hardware with it, otherwise the sealing system may not work and the locknut will not extend the right distance from the sprocket face.

And not all Shimano freehub bodies work on all their hubshells, some will have the splines at totally the wrong distance from the spokes, something I have encountered more than once, and no tinkering with washers can fix that.

I usually limit any forcing of wider wheels into narrower dropouts to a 3mm difference, but that's mostly for keeping the wheel installation simple. You could go wider if you had too, but then sometimes the quick release feels springy as the dropouts tend to splay out of parallel.