[LakeCleElum]

A "leak down" test before you took it apart would have given your answer.....If was mine and I had it already apart (and I've done plenty), I would:

replace rings and hone cylinder. (reuse piston if it measures OK).
replace valve seals.
lap valves.
measure guides.
(very rare for the guides to need replacing on these smaller Japanese motors - they go over 100,000 miles on the larger engine).

Parts are cheap on Ebay....I bought my grandson the little Kawa 65 2-stroke that had low compression.....bought piston/rings/pin for $40........