First, lapping the valves: the coarse paste is for getting the valve and seat clean all the way around. The fine paste is for polishing them to a fine finish. The polishing part is rather time consuming and not necessarily rewarding. Provided the valve seals, it hammers itself into an even smoother finish than you can get with the fine paste. The potential issue is getting the engine through the first, say, three or four hours' running without leakage developing - if it starts to leak across the roughly finished seat, the leakage will get worse instead of better. More important than fine finishing, is getting the seat width right. The width should be even all the way around, and about 1 mm wide. Too narrow and the valve will hammer deeply into the seat. Too wide and the valve will probably never seal properly, since it won't burnish the mating surfaces.
The first consideration in choosing a cylinder is whether it has any damage. If neither cylinder is damaged, I'd be primarily interested in the bore wear. If bore wear is equal, I'd choose the one with better valve guides and valve seats. If the exhaust valve guide of that cylinder is worn, see if you can get it replaced and reamed at modest cost. Installing the guide is easily done with a stepped punch and a hammer, you don't really have to have a press, but the reamer is probably a unique size for that engine. So, if your spare cylinder's bore is at least as small as your smoky engine's bore, and its valve guides are better, I'd be using the spare cylinder.
