J, I have some input, and please excuse my ignorance because I don't know your experience with a motors/rebuilding (I am no expert by any means), although I do know you are a 4x4 guy and super smart.
IIRC the rule of thumb is that if the cylinder ridge can be felt with your fingernail it needs to be removed (or smoothed out at least). From your pics, that block looks worthy of a deglaze, which would bring back the cross hatching and reduce that ridge.
Since you are having your block tanked, have the shop deglaze the cylinders and check the tolerances on the cylinders, crank and rods. If everything checks out then you know what parts (bearing sizes etc.) you need (or need to recon or replace) and you have a fresh block that will have full compression after your refresh/rebuild.
For comparison to your pics, here's what my 360 looked liked after a tank, new freeze plugs, cam bearings, paint and a deglaze:
After the tear down, the cylinder walls were almost mirrored, and someone obviously never ever changed the oil, and just added some when it got low. This was a stock bore, with just new rings. I needed the crank turned, so I ran .020 oversized crank bearings and the rods all checked out to be in spec and did not need to be recon'd.
Here's a better angle:
If you can swing it in your budget, I would really suggest getting a deglaze at the minimum, and new rings. But I understand sometimes it's not a priority or in the budget to have all that machine work done.
And my memory fails me (I need to go back and re-read your thread)...how many miles were on the motor? How much are you planning to put into the machine shop and the rebuild? You are planning to put a snail on this too right?
Also, it's a small world...this poor little bunny was run hard - one of my old bosses (Rick Kern) was a PO of this particular rabbit and I know he was not known for taking care of his vehicles, and I believe he bought it from someone else who couldn't fix something with the motor. Then he gave it to his kid to race around the Zoo.
All I can say is that I'm glad you have it now!