The inside of the rod small end is also the bearing race. Mine had a spot near the edge where it wasn't perfectly round. I can't say for sure if it was made that way, or if the first bearing failure caused it.
Since it's a Flying Horse, a rebuild with be extra difficult, because flying horse motors have a lot of unique parts. One being japanese small end bearings which shouldn't cause this problem. That points to something else being the cause, like the rod.