Back in the day they used to run looser piston clearance in high performance motors. Also a piston is smaller at the top than the skirt area because the top gets hotter and expands more. I have seen quite a few motors where you could see the top ring a little much.

I would definately NOT run it with that burned piston in there. What bore size is it? I know where a few are sitting around . Since it is not really a quench engine any how you could run a thick gasket to reduce compression a little and get the needed valve clearance.