Thanks for the input guys, I gotta check out that nylon bushing.
RRW, you're right about the burrs and chips, but in this case, it's a matter of doing the job 100%. You can do whatever you like on your own bike, but I would want the chips out to do away with the risk of excessive wear/binding the swingarm.
As for cutting the line, you can do it that way, but there is actually a how-to video posted above which was made by the folks who produce the line, showing the chisel as the best method. I do have a set of instructions at home from a previous job that show your method, so I'm sure either way works well. What I found is that using the chisel or a pair of cutters leaves a nice clean edge on the teflon hose inside.
Lorenzo, I've used the foam trick on my VF750 swingarm, and many newer models come from the factory with a form of this used(the 600RR for example), as it as a tiny bit of rigidity, and keeps vibration frequencies down in these complex parts.