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It's an interesting approach - any chance of some pics?...I have a guy on myt facebook, he has a blog he put a 135 3 speed hub on his 170 cruiser using axlw extenders and it worked fine for him. He did have to drill one through for the cable but he said the chain still lined up ok, rides fine...
If it is a Sturmey-Archer hub, the adjustment mark is the end of the axle, so if he has extended it, then there needs to be a new mark. (If he hasn't done so expect the hub to fail because hubgears have to be adjusted accurately, not twiddled until they stop making noises.)