Balance is definitely critical. In a previous life I was balancing 40' helicopter rotor discs by adding 10g at a time...
I'm with Al here. You have too much energy going round, and 3500 rpm is fast. You have a couple of issues here - the integral/ bursting strength of the flywheel is one, the balance of the wheel is the other. You really have to have the balance near perfect or the thing will shake itself to pieces. I used to work with fans, and 2900 rpm was not unusual for a relatively small diameter fan - similar to your ideal wheel size, and good balance was vital
You should be able to get some flywheels turned to a high degree of accuracy and balance fairly cheaply - find a local engineering co with a profile cutter who can cut you some blanks from heavy plate, then get them turned up.
Although Nimbus is giving you good warnings too, I'd still not go with the idea of adding weights to the rim, it's another out of balance factor. The balance is really, really important!
Edit - and check the bearings and shaft are up to the job - it's another one not to underestimate. This stuff is engineering, and needs proper design. Consider a car banging along at 150 km/h (which is probably the maximum design speed of the majority of cars), 500mm dia wheels - rpm in the region of 1700. You want double that...
Balance is definitely critical. In a previous life I was balancing 40' helicopter rotor discs by adding 10g at a time...
