what size chainring are you using?

if you're out by 5mm and a shorter BB (giving the correct chainline) means the ring hits the chainstay then yes, you need to use up some of the dropout width, and you'll probably need to redish too by the sounds of it, 5mm is quite a lot..

you need to get the sprocket outward, and the only way to do this and keep the rim central is red-dish

TBH, most road frames with 126 don't have too many problems, it seems odd, unless you've got flared stays and a 52 tooth chainring