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You are right, tophet 1. IIRC Finn Agaard for many years used an 8x60 normal (I bore, .318") B Mauser in his early Kenya years until the barrel was shot out. The only ammo he got was 8x60S H-jacketed loads, the highest pressure RWS loads that in 1940 set the maximum allowable pressure for 8x60S loads. He never noticed indications of excessive pressure. Nor do I when using 8x60S factory loads in my own 8x60 NORMAL marked B Mauser of 1934 vintage.
As I wrote, the legal difference between I and S bores was only fixed with the 1940 proof law. Before, different solutions were offered, even by the ammunition factories. Two lengthy quotes, sort of translated by myself:
1934 RWS handbook, page 38:
" If you want to shoot the thicker S loads from a rifle that was originally intended for the 8x57I or 8x57IR with long round nose bullets, don't fail to have your chamber and throat reworked by a gunsmith. Failing to do so may result in excessive pressure."
The Suhl and Zella-Mehlis gunmakers used their chambering reamers as long as possible, resharpening them several times. Without set minimum chamber dimensions this practice sometimes resulted in rather small chambers and throats. As long as a 8mm I cartridge slipped into the chamber and the thing stood proof, it was deemed ok.
The 1940 RWS handbook contains these suggestions:
"As in modern bolt action rifles rarely any accident is known, the rimless 8x57 and 8x60 cartridges will be loaded with S bullets (.323") only. Modern powders allow us to keep the pressure below dangerous levels without changing the ballistics. Other with the rimmed versions: As the rifle barrels of older drillings and combination guns are much thinner, there may be a danger here. So the old 8x57IR should be loaded only with I (.318") bullets in the future. The (then) rare S barrel guns may live with slightly diminished accuracy. The 8x60R should be loaded with S bullets only. This leaves just one problem, the 8x60RS MAGNUM loads. These loads should be sold only with prominent warnings on the package: "for S diameter , 7.89 / 8.20 mm barrels only!" The individual cartridges will be marked by a black primer and knurling of the rim."
So, if you want to use S, .323" bullets in your I bore M98 rifle, do these two checks:
take a case fired from your rifle, unresized of course. If a .323" S bullet easily slips in and out the neck, the neck area of your chamber is sufficiently wide. Next, check the bullet seating depth. The bullet should be able to move at least 5mm / .2" before it engages the rifling.