I, for one, really wouldn't know what to do if I had to replace the dowel(s), but Mr. Giovanni is on the right track with grinding it down a bit. For the leak you report, I can only imagine that there is a resistance when you torque the head bolts, and those dowels are the only thing that would be the culprit.

I wouldn't be afraid to grind down the dowels too much: they are only there to align the gasket and head. So check on those things real carefully, and perhaps do that leak test as Giovanni suggested. We'll get 'em this time, t97!!!