Get an extra long dowel and make sure it extends all the way to the other end of the hole. Then it should be fine.

 

Yep - this is the correct answer. Sometimes the dowel hole is a blind hole and will need to be drilled. Make sure if you do have to drill it that the bit is at a right angle to the back of the block.
Since the dowel is roughly 1/2" in diameter, you could drill out the dowel itself, tap it and use a Grade-8 3/8" bolt through from the front side of the block to retain the dowel.

 

Personally - I'd be cleaning the paint out & using JB-Weld if I thought it was bad enough... Plus the long dowel & your good to go..

 

I would have no problem useing it. Have used blocks like this in the past.
Bob's mention of a longer dowl is good
The dowl pin are used more as a guide to align the tranns to block. The bolts are what hold the two together.

 

Some ham fisted guy pulled one side of the bell housing off then pulled it to release while the other side was still tight. Not a big problem since the bell housing bolts to the back of the motor. What I recommend is that you mount the bell hosing as best you can then index the set up to check the center line of the trans. While everything is tight and aligned drill a small hole through the bell hosing into the block above the broken dowel (1/8 will work) and use a press pin to provide a reference for final alignment.
HTH
CB