Hey Folks,
For those who are interested I fixed the issue. It makes a HUGE difference in my opinion.
Here's what I did:
I asked a friend to make me an aluminum copy of the string saddle block, as you can see here
https://drive.google.com/file/d/12TnqqU ... sp=sharing
Then I measured the distance between strings on my Danelectro 12-string, which is similar to what you find on most other 12s as well. There's about .10" between each string on most 12 strings, but only about .05.5"-.065" between strings on the Fender XII. So I cut spacers out of feeler gauges to make up the difference. .035" was good for the higher strings and .03" was good for the thicker, lower ones.
I then removed a considerable amount of material from the inside of each post, enough space to place a string spacer gauge between the strings of each set. It took a little bit of trial and error to get it right but once I removed the correct amount of material and got the spacers in, it COMPLETELY opened up the sound. Strings no longer buzz against each other in a subtle, but sustain-killing way. Also, something I hadn't really considered, it made the guitar feel faster and smoother to play, because the string sets stay apart when you fret them, instead of bunching together under your finger, which had made them feel tighter before.
Issues I thought might come up: Will the the spacers fall out easily? Nope, doesn't happen at all because there's too much tension on the strings. The saddles are really pulled together tightly. You only risk losing one when you're changing all the strings, but it's so easy to cut a new spacer out of a feeler gauge, it's no big deal if you lose one. I thought I'd have to space the strings more at the nut as well and I already have a nut with the string spacing slightly wider as well, but nope, not at all, I guess the vibration was happening more up the neck closer to the bridge, which kind of makes sense as it's closer to the attack and probably vibrates more..
Here's a comparison of the original and the updated bridge with wider string spacing.
https://drive.google.com/file/d/1WYHPWX ... sp=sharing
It looks a little bit ugly if you get close, but it's very very subtle if you look at the whole guitar. I suppose I could measure the altered saddle block and have my buddy make a perfectly machined one, but this is fine for me. I could also probably make a more attractive spacer instead of a cut up feeler gauge but again, this is fine for me too.
Finally, for all you purists who were aghast that I was trying to fix something on this guitar by making it not original. All you have to do is swap the old string saddle block back in and it's 100% original again.
Thanks for chiming in along the way.