Generally I have seen that pads run a bit inboard of the edge of the disk. I would feel pretty comfortable following old mech's advice.
The only thing I would be concerned with is the possibility of a hair line fracture developing at or near the chip. If you do a through job of blending and smoothing it should be a fairly minor risk. So inspect it pretty soon after you get it rolling(pads worn in), then take a good look after a few thousand miles and again when you rotate the tires.
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