Hello again Stephen,
If it is just a spindle speed increase you want to achieve then an earlier posting suggesting pulley size alterations will do that for you about as cheaply as you could wish.
If though you want to get the added advantage of variable speed control, which I am sure will be a revelation, then the change to 3 phase speed control will do that as well as giving you a useful upper motor speed.
The increase gained in power by switching to a bigger capacity motor is independent of motor speed and will give you a greater machining capacity, which combined with variable speed control will give you all the control and power you are likely to need. It is perhaps a little unfortunate that the Newton Tesla system does not include a 3/4 HP motor option as I think 1 HP is really more than you need for that size of lathe.
A soft mandrel was usually fitted to Myford ML7 lathes with white metal bearings and I really believe that with attention to lubrication there is no reason why they could not stand occasional spindle speeds up to 1000 rpm or so, despite all the manufacturers warnings to the contrary. It is as Neil has observed, they would not endorse what I have just said in case of claims being made in cases of unrealistic expectations using sustained performance.
Incidentally, the soft mandrel is easy to test with a fine file on the spindle nose on the face between the chuck threads and 2 MT bore, it should bite rather than slide.
If you shipped your lathe just as it is to the USA and ran it on their power network, your 680 rpm spindle speed would immediately change to just over 800 rpm by virtue of their 60 Hz supply. I doubt the bearings would even notice the difference. The best test tools for plain shaft bearings and imminent failure are your fingertips and over warm bearings are the first signs of distress.
Again, I hope this dissertation helps you make up your mind.
Regards Brian