I found a "drop in replacement" all steel compound on ebay/online from:
bmpartstech.com/product/atlas...
I got that and the first part of this video is getting the old compound removed and replaced with this new all steel version.
That seems like it works, but the new one has thinner overhangs on the t-slot which work fine for the old lantern tool post, but is too think to work as a drop in replacement for the quick change tool post from the littlemachineshop kit that I also had bought. ie .195 inches thick for the old one vs .184 inches thick on the new. That causes the t-nut to lock solid to the toolpost before locking onto the compound.
Initially I thought to maybe use the milling attachment for the lathe to trim the t-nut...but I realized I do not yet have the proper cutters to use to do that with the milling attachment.
To fix the issue for the quick change tool post, I had to install a modified fender washer spacer to raise the tool post slightly and give clearance for the t-nut to properly hold on the t-slot overhang sides.
Then I decided to try and do some test chips...but realized that I also have minimal to no tooling to use in the quick change tool post yet either. Luckily I did get a cut off blade in the kit from LittleMachineShop, and that worked if not as great as a proper face off tool (ie like can be seen here on a Blondihacks video: • Let's Make a Scribing ... ).
So the good news, I was able to make chips. The "bad" news is I need to research and get some tooling to not only use for the milling attachment, but also for using the lathe and the quick change tool post setup that now works. So that is not really 'bad' so much as a next step. :)