I did "dress" the metal with a 3/16" pin punch. I wrapped the receiver in a fleece blanket (to protect it from another unfortunate event...) and the all it needed was 3-4 carefully placed blows with a 5 oz. peen hammer.
The sharp edge is gone and my skin does not catch while dragging my finger at any angle.
Then I degreased the area with acetone on a Q-tip, warmed it up with a hairdryer for a couple of minutes, then very carefully rubbed in with the tip of another Q-tip a minuscule amount of Oxpho paste trying not to smear it on the good blued surfaces.
After a few minutes I washed it away with many Q-tips dipped in oil.
yes I know... but that's all I had in the garage...
I think the end result is a pretty decent repair. Keep in mind that these are macro photos with flash that make even the slightest detail to look much worst than in real life.
The blemish is still there but I suspect it's not the cold blueing's fault - it's the repaired surface that doesn't have the same texture like the rest of the receiver so it reflects the light differently.
I don't want to push my luck here so I am not trying to "blend it" in.
Thank you all for your help!