If that bore measurement is accurate, and is at the maximum diameter location (remember, at right angles to the crankshaft, because the piston is pushed sideways by the tilt of the connecting rod as it begins to move down the bore, so this is the maximum wear-point) I would accept it as OK to re-ring the engine with standard rings. When you get the piston out you will be able to check the ring-grooves for wear. If they are OK also, you can re-use the piston.
Because the bore has some wear, you need to deglaze it with minimum metal removal so it doesn't become even larger. The idea of deglazing is to end up with a cross-hatched pattern of honing marks around the bore, at about 30 degree angle to the bore, symmetrical in both directions. You can do this with some fine emery cloth, or even wet-and-dry, kept oiled while you rotate it in the bore with your fingers. However a better way is to make a simple lap. This is a round piece of wood of a couple of mm less than bore diameter, with a piece of steel rod axially through its center. You saw a slot in the cylinder, longitudinally, and angled forward of radially, so you can tuck the end of the emery cloth into the slot and wrap it around the cylinder. To break the glaze you slide the wrapped cylinder into the bore and mount the end of the steel rod in an ordinary electric drill (either hand type or bench type, so long as it can be reversed in rotation, and can be run slowly). You then run the drill slowly while rapidly moving the cylinder up and down the bore. Keep the emery cloth wet with oil. After about 20 seconds or so, stop, take the lap out of the bore, wipe it clean with a cloth, and look for the lapping pattern of rub marks in the bore. When you have largely disrupted the glaze without removing a noticeable amount of metal, take the wooden cylinder off the steel rod, put it on the opposite way around, reverse the drill's direction of rotation, and repeat the process exactly. When you inspect the bore you should then see the required even, cross-hatched pattern of lap marks.
Remember, you must keep abrasives from entering the crankcase, so wrap everything down there in clean rags before you start. The emery cloth should be about 200 grit size, but opinions differ on this. (I once reclaimed a Lister cylinder by using coarse floor-sanding paper until I got to the bottom of the pits, then shifted to finer cloth to produce the honing pattern).
