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Replacing the HG on my friend's car -- pulled the head tonight and found this! Nasty! Cylinder #1. A gouge wound on the outer cylinder perimeter. By the looks of it, seems it has been this way for some time (crud in it and Anyone feel this is a show-stopper? As in, get a new block or get a new engine? Or... is there an in situ solution? Or... is the compromise far enough on the outside of the ring to not impact the integrity/seal of the gasket? How in the heck did this happen in the first place? Any guesses?
I wouldn't risk re-using that block. Like you said, just looks nasty and like it's on the verge of giving up. That cylinder wall is having some issues.