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correct me if im wrong but it looks the block wasn't decked enough. The marks don't look like a cookie disc. And why would you cookie around the cylinder and not around the hole gasket surface.

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You'd have to ask the owner for the answer to that. He did tell me he used a cookie to clean the deck and that's exactly what it looks like. I see this kind of thing all the time. Had he not "cookied" it, we could have taken .002 off the deck and all would've been clean and straight. Now he'll be doing some chamber work on the heads instead.
In the end it's no big deal to me, the machine's doing the work, but I thought I'd share this little tidbit for anyone thinking of doing something similar.