Assuming it's not a metric mis-match, the hole in the drawbar got punched with a 'dull' or worn die.
Try feeling 'inside' the hole on both sides with your fingernail or pointed hook and see if perhaps there's a tiny ridge at each side on the 'inside'. The inside diameter of the hole may be closer to 1-in than you think.
I've run across something similar once and was able to use a hand grinder to knock off the top burr and a coarse rat-tail file to get rid of the internal ridge. The fit for a 1-in shank was tight, but worked.
I knocked the sharp edge off the end of the shank, oiled it, and whacked it with a larger sledge and it went. Don't think it'll come back out anytime soon, nut or not.
Depending on your plans and expected towing load(s), a 3/4-in shank should work fine; I wouldn't even worry about a bushing. Make it up tight and use it (may need a washer on bottom for the nut to seat against the oversize hole).
Please post back your continuing experiences so we may all learn.