Compatibility question

You can look up Baerwald, Lofgren and Stephenson alignments. These are all based upon sound mathematical engineering studies. 

Not a complete disaster. Since it is a pivoted arm the areas of maximum distortion are at the start and end of an LP. With proper alignment there will be a broader area at the center where distortion is lowest. The farther off the alignment the smaller this area is and distortion at the start and end greater. I would make the effort to maximize alignment, especially if you plan long term use of the AR. 

If I mounted the cartridge to a replica head on the original arm what, in your opinion would be the loss in sound quality. Would it be minor or a complete disaster?

I don't think such a headshell exists. It would be a major improvement. The rest of the arm  mechanism is good. Replacing that is a major operation. 

That is the information I was looking for. Looking at the original headshell it makes complete sense. I believe I will follow your advice and send it off for the upgrade. I really like the Supex cartridge and love the AR turntable so the additional investment will be worth the money for me. I am also trying to see if there is a replacement headshell with the tightening tabs like the original that provides the travel distance needed to move forward without replacing the arm tube. Any idea if such a thing exists? 

If you will be using a replica headshell then you will not be able to properly align any cartridge. That's a problem with the AR headshell. It only as a fixed position for the two mounting screws. No adjustment for tracking angle and overhang is possible. When the AR appeared (1964) hardly anybody gave thought to proper alignment. I have a nicely modded AR from Vinyl Nirvana. The stock arm tube was replaced with a Technics arm tube and removable headshell. This allows proper alignment. I suggest you remove the AR arm and send it to Vinyl Nirvana for the arm tube replacement. Otherwise you will experience excessive tracking distortion.

The Supex cartridge and Yamaha preamp will work well without problems.