So far as piston clearance is concerned, for a solid skirt piston such as you have, you need a fair amount because of the thermal expansion of aluminium. The rule of thumb for newly-built engines of that type was at least 0.001", more usually 0.0015", per inch of bore diameter, which would be about 0.002" to 0.003" for your engine. If you have less than that you are at risk of seizure when the piston warms up. I would not expect audible piston slap below 0.004-0.005" cold clearance, after the engine has warmed up. Hence I think your engine would be a bit noisy if you put it back together like that. My view is that I don't expect much from a Tecumseh engine, least of all quiet or smooth operation. With regard to the look of your bore, you may have used a coarser abrasive than I would have used. In your situation, with some marks to polish out, I'd have been looking at 220 grit cloth or wet and dry paper. It looks more as if you've used a cheap hone, and honed it dry, rather than using 220 grade cloth and lots of kerosene. Your helix pattern looks fine - I like 30 degrees to the horizontal and you've probably got 45 degrees, but that is still a good angle to use.
If all it will take to finish the engine is a set of piston rings, which should cost about $15, I personally would put it together, fire it up, mow some grass, and see if I was satisfied. Chances are that as far as mowing pleasure is concerned it will be a glorious engine to use compared with a Victa 2 stroke, and at least as good as a Kirby Lauson. If you haven't been spoiled by a Briggs in decent condition or an OHV Honda, you might find it fully satisfying. Let's face it, if you'd been looking for Honda-like pleasibility, you would never have considered repairing a Tecumseh in the first place. The pleasure is in bringing a tired engine back from the dead at negligible cost, and there is a good chance you'll achieve that.
