You have some meat on both sides and all you need is to remove a hair on each of the shoe-rail... adjust the fence on the table saw and adjust the saw blade height to match the reveal and send it through and spindles will fit.

Good luck

If that's some sort of cheap pot metal shoe, I'd put a 50 grit on a belt sander, tip it on its side on a bench, set the trigger, grind the shoe sides down until they fit into a 1 1/4" test piece, then repaint.

That or tack a straightedge onto the bottom rail and run a laminate trimmer with a 1/4" straight cutter down the dado making it a 1/16" wider or so. No need to do each side; you'll never see the difference.

Why not just install a fillet in the groove?