It's probably not work-hardening. I'm not familiar with those castings, but I assume the crankshaft casting is cast iron. It's not uncommon to run into an occasional hard spot in cast iron where the carbon content wound up too high due to inhomogeneity problems or improper cooling of the melt. Carbide tooling might might get you through it, but if it's too widespread it might be cheaper in the long run to discard the casting and make the crank up from barstock. I understand why many parts are best machined from castings, but some, especially crankshafts, aren't well suited for castings. A better quality part could probably be more easily fabricated from barstock - either cast iron or drill rod plus some bits of hot or cold rolled steel.
I just sold a set of castings for a Challenger V-8 and many of those parts would have been difficult to fabricate fom barstock. But the kit also included cast iron cylinder liners that had been cast with steep draft angles that would be difficult to chuck up for their initial turning. Even worse, the cast iron looked pretty nasty and was probably riddled with hard spots. Those parts would have been much better sourced from a short length of 1" round gray cast iron or even better 12L14 in the kit. Unless you just want to solve the challenge of working with the casting, I'd go the barstock route. -Terry