I just went through a similar problem on a set of retracts. I used Carrell's suggestion above and drilled progressively larger holes into the set screw. (Use a drill vise or a set of vice grips to hold the part secure) When the side wall of the set screw was paper thin, I just used a small punch/screwdriver to break out the remaining metal. Worked great and did not damage the receiver threads. Oh yea, I had to do everything under a magnifying glass to see what I was doing. Good luck.

Paul