Thanks everyone for your thoughts.
I'm on the same page, that Helicoil repair would likely be best.
I'm still not clear what the two separate materials are in the picture:
https://imgur.com/a/kX7ZWXS
If I helicoil this, I calculate that I'll drill out all the material that makes up the inner ring, and then be tapping new threads into the casing.
I'm not sure what this inner ring actually is, whether it's part of the sump, and whether it matters if I drill it out..
Once the screws have loosened up, I can try and take the engine out and apart to find out, unless someone can advise.
There's a youtube video of a bloke in India Helicoiling the YBR125, but I can't see the same inner ring on his sump. It's most clear at 2:07:
Thanks!