Thanks for the additional replies. As I mentioned upthread, I am familiar with what the official BSA guidelines say.
I also know the pros and cons of Badge Magic vs. sewing. I have an older child in another scouting organization, so btdt. Not soliciting advice on that issue.
We left his blue shirt intact. Never had any intention of taking his Bear and Bobcat badges off that.
I got the khaki shirt from a friend, and it fits him with enough room for both Webelos years, but not likely beyond. It too will remain as a keepsake, after he crosses over to the troop.
For now he will go with an empty left pocket and we'll wait to see what his Cubmaster says. I like the oval webelos patch.