Go ahead and deck the block, surface the head or put on a Snyders or Burtz head for a little more poop. Check the valves. Does it have mushroom bottom valves or straight stem valves? If the bores look good check the piston to wall clearance you want a minimum of .0035, .004 is better and out to .006 is ok. Then hone it with a ridgid hone and put new piston rings in. Looks like some stuff went thru the motor and got the crank a little. Just polish the crank and check the bearing clearance. If you need new pistons I wold go with the AER pistons. (Antique Engine Rebuilding) they use a more modern narrow ring than the snyders and they are cheaper than the EGGE's. Open up your oil pump and see if any of the crap went thru it also.
Use the BEST graphite gasket. When your checking the block for straight on the intake/exhaust side of the block you should also check your intake and exhaust manifolds.
They should be surfaced together to get a good seal, maybe thats where one of your issues is. What type of cam gear is on it? I'm sure the engine shop is also aware of all the above, but at least I've given you a few things to talk to them about.