I would think you would want the internal "anvil" as hard as possible and as close fitting to the bore diameter as you could get for a sliding to very light press fit. Would it be helpful to radius the external punch to the outside diameter of the barrel if you were trying to preserve the blue? If the "anvil" has a slight taper on the nose, you should be able to work the dent up a bit at a time? Or, is it better to push the dent up and then tap it back down?