Bearing failure:
A friend of mine when I told him I was not going to put a seal in suggested that I pop the spring in the seal and install it. He says that there would be no or very little mechanical friction/resistance but this would still offer about 50% protection against rain and snow. But then again as you indicated first bearing failure you've seen just a thought.

Will keep my eyes open for the "Doc Wattson" as I will need something like this eventually!!

P.S. The bike reminds me a bit of the Easy Rider movie!!!