In the first place, the top strap cutting or etching you describe is not a problem you need to be concerned about. I have absolutely never ever heard of any S&W, especially the 357s of any frame size, ever developing any problems or coming apart where the top strap had been etched, and 'etched' is a much better and more definative term than 'cutting'. I seriously would not worry about the strength of the frame with a S&W that has seen top strap etching, period.
However, as to the barrel gap - yeah, that's a bit large. I understand the gap tolerances range from .003 to .006. You are absolutely correct in that the proper course of treatment for this problem is to return the revolver to S&W and have them reduce the cylinder gap to proper specs. Have you even yet tried contacting S&W to see what the cost would be?? And while it is there you could always have them refurbish it and make it new.
And yeah, if you reload normally, that is with the heavier 158 - 200 gn slugs and slower burning powders, the flame cutting on the top strap will lessen................