Thought some of you might like to see these pictures. Frankly, I was scared to hone our block, so I researched quite a bit first. I wondered if the rings had worn grooves in the top of the block before we took the motor apart, so I called a couple of you and asked. I was told that they were not uncommon which made me wonder how many 0.001s I would have to remove to restore the bore. I now have the answer.
The upper part is the torque plate. All the bores started at least 0.001 tighter in X at the top than the bottom, and at least 0.001 tighter in Y at the bottom than the top. This kind of oval is difficult to hone out of the iron blocks but it cleaned up nicely here. Here's the problem, this hole is 0.007 over the piston, but it is nearly perfectly cylindrical (less than 0.0003). The following two picture show that the grooves are still present when the rest of the bore is at 0.003 over.
The block is now complete with all cylinders finished like the one above. The next step is to Nikasil the bores back to OE diameter which should give us a super long lasting block that might completely resist the wear patterns you see below.