I cleaned up the block and checked it with a machinist's straight edge. The block has a .002" hump in the center that slowly tapers to nothing at both ends. This is almost the mirror opposite of the head, making me think that the head's slight dip in the middle is probably the result of 245,000 miles of heat cycles being bolted tightly to the slightly convex profiled block.
In short, I've decided to keep the "Junker Budget" theme and run the head and block as-is without machining. To help ensure the head gasket fire rings have more stability during high cylinder pressure, I've decided to add a .041" stainless oring.
A fellow Competition Diesel member lent-out an Isky Groove-o-matic tool to me so I could o-ring the block. This was the most cost effective way to add o-rings to this Cummins motor setup. The traditional method is to o-ring the cylinder head, not the block. The tooling to do this at home is cost prohibitive so I chose to oring the block.
Below are a few pictures of the groove and the Isky tool itself. The tool was correctly setup by the previous user and tool owner, however, I double checked the cutter depth using .030" feeler gauges under the (4) guide tabs which placed the cutter flush with the deck surface. Then, when using the tool, the feeler gauges are removed resulting in a .030" deep cut which calculates to .011" oring wire protrusion.
Only cylinder #2 is complete so I need to spend a couple of hours to do the other (5) cylinders.
Here is a closeup of the depth tab that also adjusts outward with the large central cam-plate/nut setup to act as a centering guide on the bore. There are four tabs act as both the depth guide and the bore centering guides.
The guides above hold the cutter square and at a consistent depth, then the carbide blade can be set to whatever depth is desired with this adjustable depth locking allen head bolt.
And finally a closeup of the cutter in the groove.