I would certainly remove the nylon washer. I don't know if I would even use a metal one. Avoiding the machine shop, I would smooth the adjoining steel by wetsanding with some 220 or finer.
Use no washer, Put one nylon self locking bolt on backwards( nylon side in), and hold it tight with some needle nose vice grips, then take an angle grinder with a cut off wheel and cut the bolt to the thickness of the needle nose vice grips. Perhaps use some threadlocker, or a dab of superglue to keep the nut from backing off.
I would also round out those 90 degree corners so they don't snag and rip clothes or skin.
The threads on the pivot point bolt will eventually become crushed and allow more slop. I don't have a solution for that.
I think the sofa bed that came with my conversion van used a steel rivet as the pivot point, and no washer.
How about a small clevis pin, a washer and a cotter pin?
clevis pins