Steinoff,
I would not change the austenitizing temperature from 1600 F. Since the section is only one inch in diameter perhaps you could austenitize for less time, but again, I would be inclined to keep it at one hour, especially if you don't have a normalized structure prior to austenitizing.
Now, I think it is apparent that decarburization occurred, with two excursions to elevated temperature without a proper atmosphere. As unclesyd mentioned, it does not have to be a vacuum-- just not an oxidizing environment. The following is copied from the Timken Latrobe heat treating suggestions that I previously linked:
1. Use a furnace which produces either a vacuum or an oxygen-free atmosphere inside a sealed heating chamber.
3. Use an air furnace which contains an interior muffle that can be filled with inert gas. Some special muffles generate an inert gas as they are heated.
4. Insulate the workpiece from the air by one of several methods:
A. Wrapping in an air-tight envelope of stainless steel foil.
B. Painting or plating the surface with high-temperature paint or metallic plating.
C. Packing the tool in box of inert material.
Option 4A is a very common method to avoid decarburization when heat treating small batches. You can buy these stainless steel foils/foil bags from McMaster-Carr. A reputable heat treating supplier should already be aware of this technique if they cannot create a neutral atmosphere or do not have a vacuum furnace. I recommend you stick with the suggested times and temeperatures, and use one of the above techniques to improve the heat treat process. Use the following link for more information on the foil bags: