Yea, the cable casing should stop at the lever body and it should only feed cable to the lever itself.

Yes, exactly. And if it's larger than that, you have to rely on the metal of the ferrule to hold the pressure which it's typically not made to do. If the ferrule can't hold it, no amount lf tension adjustment would fix it because tension just regulates the position at which the lever is when the brake pads have fully engaged the rim. The force you apply once engaged is roughly the same (unless the brake bottoms out but that's not an effective braking adjustment). If I were you and spending the money on new brake levers wasn't a problem I'd do that instead of trying to workaround it with a strong ferrule. You could replace just the front. The rear brake doesn't do much anyway.