[PeteKz]

It sounds like you are doing the work yourself. Street car? Are you trying to minimize costs? Are you entertaining ideas of increasing performance "while you're in there"?

Compression ring end gaps of 1.25mm are way beyond spec. The wear limit is 0.80mm.

If you want to minimize down time (get it driving this spring) and cost, then new rings and deglazing should be as far as you go. Do not split the case. Since you have the cylinders and pistons removed, take them to a Porsche shop and at least have them measured to be sure they are within wear and ovality specs. Or buy a bore gauge off Amazon for $60 and check the ovality yourself. The cheap bore gauges are not extremely accurate in absolute measurement, but they are good enough to compare the top-to-bottom and side-to-side dimensions for ovality.

Of course, get the heads inspected too, and count on replacing the valve guides and seals, and getting valves and seats refaced.

Now for the "slippery slope" part: If you have to replace the pistons or cylinders, you can keep costs down by finding used but within spec replacements. You don't even have to replace all of them, just the ones that are out of spec. BUT, for about $5K you can get all new Mahle Sport p/c's and increase the compression from the anemic 8.5 or so that the early SC engines used, and increase the displacement to 3.2 liters with the larger diameter versions. Add an M1 or similar cam ($1000), and you can bump up the power by 15-20%. You should also do some cheap tweaks to the CIS and distributor to realize those gains. Next step up would involve higher compression pistons and a more aggressive cam. That would also require a new intake system, either carbs or an EFI. Those will add many thousands of dollars more.

Others, particularly the pro builders, should weigh in here too.