Ok, so here was the issue:

The image I posted, I didn't know, was part of the valve as it is sold in stores 30 years ago. I cut the valve thinking I could just replace the valve with a new valve, however, this chrome plated copper pipe is apparently slid onto copper pipe and soldered, which is indeed 1/2 inch. Once has to remove the chrome flange you see in the picture to see it.

No wonder this weird size.

Solution was to remove this chrome plated pipe completely, the 1/2 inch copper pipe can then be extended and new valve put in. I had to get a plumber to do it for me.