Thanks for the replies. I don't know how long the mower had been out of service before I got it but I suspect the spark plug was left out and that's how water got in.
There's no rust damage to any other internal part so I might have been lucky in that regard.
I don't have a cylinder honing tool but I was planning to buy one, they're reasonably cheap at around $20.
To oversize the cylinder, that would probably be something a shop would have to do for me I suppose, I don't have the tools to verify that I've done the job properly.
I can buy an oversize piston and ring set for $40 from Thailand, it is 0.020" (0.50mm) oversize. It seems to be the only oversize piston available for this engine so it would have to do I suppose.
