The short answer to your question is that welding grade oxygen is probably OK for homebrewing. I know that the only difference between medical grade and welding grade oxygen at my local industrial gas supply is the container the gas goes in. Medical grade oxygen must go into containers that are only used for that grade and there are probably some special inspections and filling procedures used for the medical grade stuff. The actual oxygen gas comes from the same bulk tank. My guess is that most gas suppliers use a similar procedure. As far as contaminants from oxygen go, microorganisms are not a concern because, as you mention in your question, pure oxygen is not a very hospitable environment.
I do suggest using caution when using pure oxygen to oxygenate wort. The problem you face is that the solubility of oxygen in wort is much higher when pure oxygen is used instead of air. Most brewing texts cite the ideal level of oxygen in wort prior to fermentation at around 8 ppm or 8 mg/L. Levels higher than this can cause oxidative damage to yeast cells. When using pure oxygen, wort oxygen levels of about 30 ppm are possible, making over-aerating a legitimate concern. One way to meter the flow of oxygen into wort is to use a gas flow meter. Gas rotameters are common and relatively inexpensive devices that measure the
flow of gas.
If you have a flow meter, you can use it to meter gas flow and determine the amount of gas required given a few assumptions. Let’s say you want to add 8 mg/L of oxygen to your 20-liter batch, you can see that you will need 160 mg of oxygen (Note to metricphobes: get over it! The metric system is so much easier than our units when doing these types of calculations. No metric to English conversion is offered because chemistry simply cannot be addressed without using the metric system). 160 mg is equivalent to 0.005 moles of oxygen (0.16 grams/32 grams of oxygen per mole = 0.005 moles). If you multiply 0.005 moles by 22.4 l/mole you see that 0.112 liters of oxygen are required to supply the 160 mg required to yield a concentration of 8 ppm in your 20 liters of wort.
I said there are a few assumptions required for this calculation. The first assumption is that all of the oxygen injected in the wort goes into solution. This is not a bad assumption if the oxygen is bubbled from the bottom of the fermenter and the bubbles are really small. A wand with drilled holes (rather than a gas stone) would produce larger gas bubbles which have a reduced tendency to dissolve into the wort. This would be evident as bubbles break the surface of the wort. Assuming 100% transfer is not a bad assumption as long as you use a stone and keep the oxygen flow slow during aeration. The second assumption is that the ideal gas law is valid enough for brewing and that one mole of oxygen is similar enough to an ideal gas that the 22.4 liters/mole (at atmospheric pressure) conversion is believable. In my opinion, the ideal gas law is certainly good enough for brewing. If you are a chemistry guru fell free to use your favorite equation of state.
If you want to buy a gas rotameter look for one that is scaled in liters per minutes (not cubic feet per minute) with a range between 0-1 Liter/minute (lpm) and 0.1 subdivisions. In this example, running the gas flow at 0.2 liters per minute for 30 seconds will introduce about 0.1 liters of oxygen.
Some brewers attempt to replace a gas flow meter with a gas pressure gauge. Without getting into details, I do not recommend using pressure as an indication of flow because it simply does not work well. Unless you know that 10 psi gas pressure delivered to your stone gives some known flow rate you are guessing. The bottom line is that to use oxygen for brewing you really should have a flow meter.
Once you get some experience in introducing oxygen into your wort you can begin making adjustments. If you believe that less than 100% of the gas is going into solution, you can make small adjustments to compensate for the loss. Without measuring the oxygen concentration in your wort this is certainly a guess, but it can be a reasonable one. If you approximate that you are getting 90% of the oxygen injected into your wort, simply divide 0.112 by 0.90 and increase the oxygen volume to 0.124 liters. By using a flow meter you can make small changes with the confidence that accompanies knowing your flow.
We use air for aeration at Springfield Brewing Company. Dry compressed air comes into our aeration panel, flows through a sterile filter, then to a rotameter flow meter before the in-line injection point. Whether using oxygen or air, gas flow meters are handy gizmos to have around the brewery!