Yes, cutting a groove around the OD of a bolt would certainly reduce its torsional strength by a significant amount, much more so than drilling a hole up the center.
This would apply only to XK120 up to engine W.4019 and Mark VII up to engine A.4940 serial numbers.
This is generic, but it does give hard numbers for BSPP banjos. All the specs are in newton meters, and for steel. They recommend the spec for brass would be 65%, so I expect aluminum would also be about 65%. At the bottom of the chart, it also shows turns from “finger tight, (TFFT)” which SOOO sounds like a British spec. Seeing these numbers, I’m more inclined to switch to the nylon washers I’ve been dithering over.