The NEC wants you to avoid overfilling a conduit so that the conductors can dissipate heat, and so you can remove a conductor without damaging it. See NEC 300.17.
There are only 9 single pole circuits (so 18 conductors?)
Ground conductors count for equipment fill, so you have more than 18 -- maybe 23?
Ironically, when you get close to a fill limit, the NEC actually wants you to increase conductor size, because that reduces heat.
Should I be worried or just put the cable through it anyways?
If this was my house, I would want to add a new conduit, if only because pulling the new conductor will be so much easier.
Do they make "reducing" hubs?
Yes. Here are some examples: http://www.thomasbetts.com/ps/endeca/index.cgi?a=nav&N=3819+598+4294951140&Ntt=
I've always found I needed 6" of conduit to make the transition between the reducer and the male fitting that connects to the box. Luckily my local hardware store will sell PVC conduit by the foot, so I don't have to buy a full stick for this.
As @Tester101 mentions, you can also make the hole bigger. A step bit is a nice tool, but 1 1/4" conduit requires a knockout that's actually ~1 3/4". The one he linked to only goes to 1 3/8", and I haven't seen bigger.
The professional way to make a larger knockout is to use a punch. They're a little expensive. Maybe you can find an electrician who will punch the hole for you in exchange for beer or a favor. Or maybe a tool rental place will have a bunch for you.
You don't have to bring the conduit in through an existing knockout - you could punch a hole on the side in a blank area, if that's more convenient for you. Alternately, if there's a good spot with 2 small knockouts, you can consume that whole area.
In your existing installation, I think the lock washer is upside-down. There are sharp edges that are intended to bit in to the metal, so it won't come loose. Unfortunately fixing this means undoing a lot of wiring.
Also, I think you should use a bushing to protect the conductor from the end of the conduit. Whether your inspector will require it is difficult to guess, but it's seems like cheap insurance. Something like this:
Also, I hope that if you're going through the trouble of pulling a big conductor to a new location, you're installing a subpanel at the other end. Because subpanels are awesome.
Best Answer
You can put a hole in a NEMA-1 enclosure, but if it is a NEMA 3R (raintight, outdoors) the conduit entry must be able to maintain the N-3R rating. The most common fitting is called a Myers Hub. This assures you from dripping water on live parts and that's why KO's are at the bottom and lower sides. Also any sharp edge must be bushed. I'm assuming that's you "threaded union" (not an electrical term).
As far as bending radius of conductors here's a link that may help. http://www.cooperindustries.com/content/dam/public/bline/Resources/Library/catalogs/meter_mounting_equipment/ring-type_metering/ed-minimumwirebendingspace.pdf
Its Tables 312.6 (A) & (B) of the NEC.
There's also NEC rules for conduit entry and bending radius that is Article 314.28 pretty much the whole thing. It may not be directly relevant but should be looked at for verification.