If the hair dryer isn't working, you could try boiling water. Give it a dunk in that for a while, then try to stretch it out, with your fingers (take care not to burn yourself in the process) as much as you can, and then dunk it in ice cold water to "fix" the new shape. Again, if the plastic is really hard, you might not be able to get it to budge at all, or it might just break under the stress.
Dremeling out some plastic, as you've suggested, might work too, provided the armor is thick enough and the size difference between the two figures isn't too great.
Oh yeah, I just remembered some comments I read some time ago from a guy who was trying to get some removable plastic clothing to fit on a female sculpture (one of those kits you have to build yourself). What he did was put the clothes on her anyway, as best as he could, then he tied some rope/twine around them, binding them very tightly to the body, and then threw the whole shebang into a boiling pot of water. That did the trick, but, in that case, the clothes were actually sculpted to fit the character and had just warped in the packaging, they weren't from another figure. Anyway, it's an idea.