I have been contemplating building a rifle on a Yugo Mauser action. It will be for a wildcat/nonstandard chambering. I have almost decided on 358 Winchester but then thought, "What if I took a 358 Winchester and necked it DOWN to 338?". The result would be something like a 338-358 Winchester or 338-08 since the 358 is basically a necked-up 308. (35 Whelen is a necked-up 30-06, 358 is a short action 35 Whelen). Has anybody heard of this chambering? I'm sure it has been done at least once in the last 100 of modern rifle making and shooting but I can't find any info on it. Any info will be greatly appreciated.

It's been done, here is a list of reamers, .338-08 is on the list.
reamer rentals

If no one here shoots it, google it at .338-08 wildcat You will find a lot of info.

I'm not much of an advocate of wildcats but if a wildcat is what you really want I'd suggest you consider the .338WSM.....based on the .300 WSM cartridge....it's quite spectacular.....but for that matter if the Yugo will handle .30-06 length cartridges, the .338-06 is also a spectacular choice. I believe this is possible in the VZ24 models so common today......Look at the Charles Daly website for a new '98 action for the .338-06 and possibly even the .338WSM.......

Those both sound great (the 338-06 is next on my to build list) but I don't really need anything as big as 338WSM though I did consider it briefly just for fun. It's just too much for my purposes right now. True the 338-06 is more than necessary for deer too but it's kind of an unusual caliber. Unusual calibers facinate me right now. I expect the 338WSM to be a factory standard round pretty soon.

Unfortunately, the Yugo actions aren't long enough to handle the 30-06 length rounds. Bummer. Biggest advantage of the Yugo action right now is I have one. I will get a full length action in the next couple months as soon as my FFL comes back. I buy the surplus Mauser actions to build on. I can build a whole gun for what I would pay for a new gun. A new action alone is as much or more than a new gun.

The .338/'08 that you are contemplating is a very excellent round, every bit as good as the .358.... Another fine one is the .338/.284, which is also short enough for your action. In adddition, it will give .338/'06 ballistics, but of course action feed rails might require alteration for smooth feeding from the magazine!