I think it would near impossible to Dremel out with the pressure plate in place. Need to remove it. I cut the small center ring part out and remove the guts of the bearing, then made two cuts of the out shell carefully at around 9 and 3 o'clock positions. Careful, it will pop out pretty good when you get to the end of the last cut. Also, went through about 6 mini cutting disks. Their fragile.

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'82 300TD
'84 300D OM617
Auto to 4spd Manual Swap 716.210
'85 300SD 2.88 Diff (Direct Swap)
W140 HD Rear Springs w/ bilstein shocks (SLS Delete)
'83 300SD Big Brake Booster Swap
Late model 240D Manual HVAC Swap
W124 Outside Temp Gauge
Aftermarket Keyless Entry

'84 300D RIP