Feel free to skip ahead if you don't want the novel.

I'm something of an amateur in the biking world: despite having been able to ride since I can remember, it was only when I bought a 1989 Trek 400 road bike that I started to give any real consideration to the complexities of bike mechanics.

I've recently completely disassembled the bike, had the frame powder-coated, reassembled it, and bought a new wheelset to match the new color scheme. I've got the thing completely back together and working wonderfully with the old wheelset. I've assembled the new wheels (sexy blue tires on prebuilt, 40 spoke yellow Velocity dyad rims with machined sidewalls) and upon trying to put them on have discovered that the axle/rear hub assembly is simply too wide to fit in the dropouts. After fully absorbing the sting of my embarrassing shortsightedness with respect to picking out a new wheelset I'm wondering if there is an unconventional solution.

THE PROBLEM:
135mm axle spacing on the new rear hub (touring bike wheelset)
126mm dropout spacing on the old '89 Trek 400

POSSIBLE SOLUTIONS (that I've heard so far)
(1) Sell the old wheelset. Get a new wheelset that is actually designed for the frame. Swallow the hard reality that I won't get the aesthetic results I was looking for (because yellow Velocity rims are apparently relatively hard to come by and prohibitively expensive).

(2) Attempt cold-setting the frame. Most people have told me they wouldn't really be comfortable doing this given the size of the spacing differential, even with the right equipment.

(3) Customize the hub I have? Maybe it's a naive solution, but couldn't I just remove the cap on the hub (thus exposing more of the axle on the non-drivetrain side of the hub), add some spacers and re-disk the wheel?

I'm reluctant to do (1) because I'm already out about $250 and am not excited at the prospect of spending more money without any assurance that I'll get anything for the set I already have...

I'm open to any suggestions and would really appreciate anyone who could point out the gaping holes in solution (3), so I don't exacerbate the whole problem by ruining a really nice wheelset.

What hub are you using? You can probably cut the axle short and space it to around 130mm. Then it will fit just fine. Steel frame?

I've cold set a frame from 126 to 135 rear spacing and rode it a long time afterwards with no problems. Same situation as you, I wanted to use a nice touring wheelset with modern mtb hubs in an old frame.

I recommend using Sheldon's instructions on cold setting, bending one side at a time and being careful to get the alignment right. I also recommend taking the frame to a good shop afterwards and have them align the dropouts and check the derailleur hanger alignment.

Thanks for the fast reply.

Dunno too much about the hub. It's a black, 40 spoke Formula hub. You can see the wheelset here: https://cgi.ebay.com/Velocity-Dyad-40...#ht_3930wt_854

Steel frame.

If I cut the axle short, it will be off center and I would have to re-disk the wheel to center it. Would riding a wheel like that damage the hub/spokes/rim?

Thanks @well biked. I'm glad someone has tried it. That's the top of my agenda tomorrow--taking it to a shop with the requisite tools for cold setting. It'd be a shame to take it all apart after just reassembling though....

Hmm.. Those appear to have cartridge bearings, which generally have less adjustability than the cup-and-cone bearings. I think your best option is a cold set.

@FastJake thanks again for the speedy replies. I'll tell you what I figure out. Hopefully that won't be a ruined frame.

Nah. Although I've never cold set one before, many people have and I haven't actually heard any horror stories. I'm sure it'll be fine, unless the frame already has some structural damage.

I'm surprised by 89 that it isn't 130mm spaced. If you cold set you may want to wrap a strap around the brake bridge to make sure that doesn't pop if it's going 126 to 135. I just put a 130mm wheel set in my 87 400 and didn't need to cold set it. Drops in with minimal spreading.

I've cold set a 126 to 135 mm. No drama. There's a good point about supporting the brake bridge, as you've already done the paintwork.

+1 130mm into 126mm dropouts on a steel frame = squeeze it in. 135mm into 126mm spacing = cold set. I've pretty much got 130 rear wheels on all of my 126mm spaced bikes, all of them squeezed in (steel frame).

I just picked up an older Cannondale (126mm spacing) where the former owner squeezed in an 8 speed 130mm rear wheel. That wheel was tight, super tight, like almost impossible to gt the wheel on or off. I switched it back to a 126mm wheel.

Cold setting should be no problem as long as it's a decent quality frame that's not rusted out. Legions of riders in the mid 90's did this to their steel frames when rear hubs went from 126 to 130 spacing. Make sure you get the dropouts aligned as well.

I regularly cram a 135mm NExus IGH w/ a Coaster Brake in a 126mm frame...not cold set. Its a bit of a PITA to get in there when you're changing a tire in a pinch but once its in there its all good.

Thanks for the input @Zaphod Beeblebrox. The guy in the bike store with a cold-setting table said essentially the same thing.

My primary concern: if I stretch the dropouts by hand, and just enough to fix the wheel, how will that affect the positioning of my rear derailleur hanger?

likely there will be a bit of error in being parallel to the rim and the cogs, may not matter..