What I chose to do after consulting w/ a local diesel guy was to re-sleeve only the one bad hole and replace one (standard size) piston since the rest of the motor was pretty good in terms of wear/compression/etc.. It was also the most economical solution, and I picked up one used piston in almost perfect condition for $25 from a guy I met online w/ a parts motor.
The process on this is the machine shop bores a larger hole in the damaged cylinder and inserts a cast iron sleeve that is a press-fit, they leave a small *step* on the bottom as well. This will all be engines 101 for you diesel guys, but in case any mechanical novices are curious I'll show some pics. Here is the sleeve installed from the bottom, you can see the step:
The most time-consuming part of a rebuild or overhaul is cleaning parts, especially if you are meticulous, which is not bad quality to have for this work. Here is piston cleaning detail:
Interestingly, all of the major bearings and pistons are Mahle, and the pistons are forged aluminum. Just like Porsche uses.
