Bolt handles are typically replaced by either cutting off the old handle and welding on a new one, or, chucking up the bolt handle in a lathe with a special jig, turning the bolt knob down, and threading the stub. The specialized equipment and skills required typically push this modification into the realm of a professional gunsmith, but with a little care and some basic tools, a careful DIYer can do a bolt-handle swap to be proud of for a lot less money and a lot quicker turn-around.
Time and Money:
This entire project from start to finish took me around 2 hours to complete. Cost was $20 for the bolt handle (eBay) and ~$5 for the thread cutting die - which I picked up at a local auto parts store. Add in a little more for Loctite and some thread-cutting oil (WD-40 in my case).
As with any project working with metal, sharp things, hot things, pointy things, powered things - be careful and think about what might go wrong and compensate/plan around it. You're a lot more expensive to fix than most of the things in your shop. Wear eye and ear protection, and protect your hands. I use heavy-duty Nitrile gloves (because they let you feel the heat buildup as opposed to leather - yet are still protective).
Step 1: Layout and Planning
The basic technique here is the idea that all curves can be broken down into a series of straight lines. You start by refining the shape down to a square, then turn the square into an octagon, then bevel all the sharp edges again until you have faceted cylinder. Once you've knocked the corners off of your octagon shape, you can start to refine the cylinder. The beauty of this technique is that it's pretty easy to judge "flats" rather than curves. Concentrate on keeping your flat surfaces the same width, and you'll find that a cylinder develops almost on it's own.
First: Put tape on any surface that might get touched by the sander/grinder that you might not want scratched up - 2-3 layers of electrical tape will work. When working, measure the diameter often - maybe more than you think you need to. Take your time when refining surfaces - pay special attention to keeping opposite sides parallel to each other - do NOT depend on your eyes as sometimes things look wrong and aren't - and vice versa. Use calipers to check parallel (look for consistent thickness). You don't need to be super-accurate as the threading process will clean up the cylindrical shape, but the closer you are to truly round, the easier the threading process will be.
In this case, the threads required were 5/16-24 NF threads - so I tried for a final "rough" cylinder at a little below .3125 inches. My final cylinder had about .003 inches runout, and threaded just fine.
Step 2: Threading
Step 3: Assembly
The threaded hole in the bolt handle was a little deeper than my threaded stub, so I cut a piece of brass stock off to make a spacer that I slipped into the hole, and then threaded the handle on to the stub. A little fitting was required to get it to just the right length for this installation. Once it was going together the way I wanted it. I cleaned off the threads of the stub and the internal threads of the bolt handle with solvent, added blue loctite thread-locker, and snugged the new handle into place.
Enjoy your new bolt handle - I can say that on this rifle, it's a huge improvement.
(I also added a couple more bolt handles installed using the same technique - just to show that you're not limited to small rimfire rifles ;)