Aside from cleaning it up, the block is ready for machining.
The crankshaft looks good to me. I felt no dings, scratches, pits, or gouges. Doesn't appear to have any blueish heat telltales. There is some staining, but no rust or signs of water intrusion. I didn't take any pictures after pulling it it, but here's one just before.
And with the pistons out, I can clearly see the damage. Here is the dead cylinder and piston from my initial post; the top cylinder on the port side. The gouge in the cylinder is barely deep enough to catch a nail on. I've been planning on having it sleeved, but now that I see it in a better setting, I think it can be bored out.
And here is the other cylinder that was low on compression, but not horrible; the lower cylinder on the starboard side. The cylinder also has the beginning of a groove, but I cannot catch a nail on it. I know it can be bored out fine. The piston isn't as bad as the other one, but it's certainly not in good shape. Instead of just one piece completely blown up, it has 3 areas that broke off.
The other two looked their age, but still in good shape. I'll just have those 2 cylinders honed.
I will be replacing all 4 pistons with WiseCo sets and will build it back up with a rebuild kit. I still have to clean up the block, but I won't be able to get it to the machine shop for a few weeks so I have plenty of time to do that. I think I'm going to repaint the block as well. Is it best to mask and spray each part on its own now or wait until after it's all assembled and ready to go back in?