....... I tried putting an AD 426 4-4 in the hole but there is too much of space in there with the rivet in........
This is one of those many times referring to drill index chart can answer a lot of questions and even help you decide on possible options. Lets look at your case specifically. Using a #40 drill, the hole is supposed to be 3/32" to accept an AD3 rivet. Referring to a drill index chart, you find that a #40 drill bit equates to .0980 diameter. But the hole is now too big for that. So you correctly decide to go to the next rivet size which is a 1/8" AD4 rivet. Using a #30 drill bit, the hole is enlarged to .1280 diameter. You have found the damaged hole is still too large to accept even that diameter. Now you are in a pickle but the situation is not hopeless. You still have a couple of options.
You could ream the hole for an AD5 rivet which is a 5/32" diameter using a #20 or #21 drill bit. Referring to a drill index chart, you find that a #21 drill equates to .1590. That is a fairly large hole and you may not have enough edge distance or possess a dimple die to accept its flush head. Even if you can meet those requirements, you may have trouble setting the shop head on a solid rivet without causing even more damage. Probably best in this case to use a pulled blind rivet instead of a solid rivet but cosmetically its size will surely stand out in an AD3 rivet pattern.
Short of scrapping the parts and starting over or fabricating a patch as discussed previously or going with a 5/32" rivet, consider this alternative: Instead of bringing the hole up to a large .1590 for an AD5 solid rivet (or 5/32" pulled rivet), enlarge the hole to a much smaller 9/64" diameter which is .1406 diameter and install a readily available MS24693 flush head screw and locknut instead of a rivet in this single location. You probably have a dimple die to fit this screw and its dimple is just slightly larger than that of an AD4 rivet head so its presence will not be all that obvious. Be aware that a #6 MS2469
3 is not a structural screw. It is up to you to decide its suitability. Also be aware that to use a structural screw, you'd have to enlargen the hole to accept a #8 MS2469
4 and if you did that, you'd only be slightly better off than just using a 5/32" pulled rivet as Mel suggests.