Bottom line here is the bolt and the tapped hole are not the same size.
Forget the dremel, forget the drill. Forget drilling out the first couple of threads. YOU NEED THE RIGHT TAP to match the head bolt.
There are a few metric and US threads where if you try to match up mixed nuts and bolts they will SEEM to go together. However they, in fact, are not. The nut is usually a little bigger. I'm sure you can run in to the same scenario with cheap taps and dies. its also easy to thread in the wrong tap in to the existing threaded hole in certain ranges of metric/us threaded holes.
Be very careful that you don't screw up the threads in the block enough that you have to put a helicoil in.
What kind of motor are we talking about here?
Does the bolt screw in to the other holes in the block for the head? If so then its a good chance you have tapped the offending hole wrong.
Also, a real dumb question here, you aren't trying to use some galvanized bolt from the hardware store are you?