So I started researching alternatives, and found it at Aquabarrel, another rain barrel vendor. They sell a bulkhead fitting with the valve and thread converter for $22 plus shipping. I ordered one and received a rugged part in the mail several days later.
Start out by disassembling the top cap, screen and tray. Put the barrel on its side.
Step 1: The Old Spigot
It is very flimsy too. Hence this Instructable.
Step 2: The New Bulkhead Fitting and Valve Assembly
Step 3: The Bulkhead Fitting Up Close
Step 4: Ream Out the Hole
Remove the old spigot. Make sure you get the nut and washers out of the barrel.
We need to make the hole big enough to accept the bulkhead fitting. I had a drill bit big enough, but no drill with a big enough chuck. So I grabbed Uncle Rudy's old reamer and thick leather gloves and slowly made the hole bigger.
WARNING - you cannot make it smaller! Go slow and try to put the fitting in every few turns. You want the fitting to just barely slide into the hole.
Periodically use a big drill bit to shave the plastic from the inside of the hole that the reamer pushes out. This allows the fitting to slide in easier.
Step 5: Finish Out the Hole
The combination of the file, a little reaming and trimming the inside with the drill bit resulted in a nice round clean hole, just big enough for the fitting.
Tip over the barrel to remove the plastic shavings from inside.
Step 6: Fish the Fitting Into the Hole.
First put the tape into the hole from the outside...
Step 7: Duct-tape the Fitting Onto the Fish Tape End
Step 8: Pull the Fitting Into the Barrel
Make sure you have the nut and rubber washer handy!
Now wiggle the fish tape to loosen the duct tape and pull the fish tape out of the fitting.
Step 9: Install the Rubber Washer and Nut.
REMEMBER: this is tough nylon, but can be stripped. Use reasonable force. You just want the rubber washer to seat fully around the curved barrel surface. Any more pressure than that is asking for trouble.
NOTE: Barry at Aquabarrel notes that the washer should be inside the barrel, not outside. He will be updating the instructions at their website, and I will update the pictures when I take down the barrel for the winter.
THIS MEANS YOU NEED TO PUT ON THE WASHER IN STEP 7!
Step 10: Install the Adapter and Ball Valve.
Step 11: Reassemble the Rain Barrel
Step 12: Set Up the Completed Rain Barrel
My barrels are on gravel, so having a firm footing is important, and the bottom block supplies that and makes it easy to level. The cinder blocks add height, and the top block keeps the cinder blocks from shifting and gives a smooth surface for the barrel to sit upon.
REMEMBER: A full barrel can weigh 600 lbs. Your mounting better be stable and safe, especially if you have kids that like to run around.