Richard's reply
I've run into this 3 or 4 times, with a few hundred of the wheel sets out there, but I understand it's a pain. FWIW, my standard freewheel works fine with it, not sure why the Shimano doesn't. Haven't tried one on the hubs. FWIW, one customer just filed down the end cap a little bit to allow clearance. I'll follow up with the hub maker as well about a tweak.
I sent Richard a reply asking about the possibility of swapping out dust covers completely.
I ended up ordering a Sunlite brand freewheel that should be coming in next week as I previously had one installed at my LBS and it seemed to work without any issues. Unfortunately the only one they had was the wrong chain size.
What worked for me was modifying the cone, I took a file and trimmed about 1.5mm off. It was relatively easy, although I wish it wasn't an issue to begin with.
Do you have a picture of your hub after you shaved it? did you do this with the dust cover still attached? got any tips for this?
It seems that only the cheaper freewheels arent affected by this. Does anyone know if any nicer quality freewheels(i.e. white industries, etc.) do not have this lip?