That does not look right! I find it hard to belive that the ring on a stock head gasket could do that, maybe I guess.
If you need a piston or two give me a yell and I will get them shipped off. They had about 130k on them and visually they lookl good.
If I had my heads off I would consider drilling out the fuel in/out ports to 3/8 or 1/2 and have them retapped. 1/8" is just gotta be too small!
I would not invest the time again in porting, just do not think it was that much if any of a gain.
Let us know what you plan!
Remember, the studs get torqued down in the block with like only 20 ft, if my memory serves me.
Keep us posted and pics are good.