The fire ring is the metal edge of the head gasket that faces the bore; so called because it's a ring (though not necessarily round) that faces the combustion heat.
Not enough info on your buddy's engine, but there could be many reasons why re-doing it would make more power, or why the initial build would lack power.
Unless a chamfer at the top of the bore helped unshroud the valves (more accurately the flow in/out), I don't know how it would make power. It seems to be there to speed up piston installation on the assembly line and to make it harder for the rings to hang up on the edge of the bore.