It looks to me like there is NO ring wear in that funny area? Take a closer look - are the hone hatch marks still intact in that area? Tough to tell in a photo.
If so, then the problem was probably with how it was bored/honed in the first place. Are there any oversize markings on the tops of the pistons?
Either way, you need to decide how much time, effort and money to put into it. Given that it has been sitting, if I was mine I'd tear it the rest of the way down, inspect the bearings, inspect the rings, check the valves/seats, etc.. You're already this far - might as well really know what you have to work with. Once you know the details, then we can help you with recommendations.
That Bore: If you have a precision dial-bore caliper or know a local machine shop, have them mic that top area of the cylinder to see what is going on.