And if you do grind a pressed steel circlip, it helps to note that one of the outer edges will be sharp, and the other rounded, from the pressing process. It might be best to grind the rounded face, so you finish with two sharp edges (and then it makes no difference which way round it is fitted).
Not everyone seems to care about this detail, but the rounded edge is clearly more likely to be pushed over the edge if things get 'interesting' as well they might in this case.
That said there are circlips which are ground on their outer diameter, so this does not apply to them.
Finally, is there any way you could add a filler-piece (a thin shouldered washer, perhaps?) inside the circlip which would prevent the clip from contracting inwards? This might save the day as you are clearly pushing your luck, here.
Cheers, Tim