Magnetic seems overkill to me. In a transmission, yes, since you may have the odd bit of stuff you want to collect in the sump and stay there. Differentials should not be losing pieces of metal - if they do, you are in big trouble.
I put a 3/8 NPT plug in my Spitfire. No problem with length of the plug, since there is an existing 'boss' on the bottom of the diff where Triumph used to install drain plugs (earlier models had them). Also with NPT, since it is a tapered hole and plug, the length of 'engagement' is just over 1/4" (I think it's .18" or thereabouts), after which the plug is tight, so not much of it actually reaches up into the diff.
1/8 NPT might be a little small. I thought for 90-weight I would like something that flowed a little faster and went with 3/8 NPT.
It is not a big job if you have the dif out on the bench and already have the case opened, which I did. I would not have bothered unless I had the diff out of the vehicle. You normally don't need to change the gear oil too often in the differential. Seems like not a good return on your time to remove the diff just for this, and I would not try to do it while the diff is installed.