The Warns and every other "external" type hub do indeed put those bolts in shear and they are the means through which torque is transferred from the locking hub to the wheel hub.
I'm one for making that connection as strong as you can. There should be some threads at ECJ5 dealing with using studs to secure the hub. When I was assembling my axle for my 3B, I tried to source some grade 8 studs but couldn't find any-anywhere. I'm not sure you would gain much using grade 5 studs. I ended buying longer grade 8 bolts, cut them to the needed lengths, and threaded the ends. Short of all that work, I think just using grade 8 bolts should suffice. But not just any grade 8 bolts. If you look at the wheel hub threaded bores, you will note that those are un-threaded for maybe a 1/4". It is very important that a full cross-section of the bolt passes that contact between the locking hub and the wheel hub. If the bolt is threaded there, I'm guessing you loose at least 30% of the strength.
And last, and maybe most important, torque them evenly and recheck them at least annually.
Here is a photo of one of my finished studs. Note the un-threaded portion below the blue tape. That is the section that fits in the un-threaded section of the wheel hub bore.

The finished hubs-and my appologies for the IH logo-but those outers were in the best condition of any of the 8 pairs of hubs I used to assemble these.
