Change the pistons, I bought a short block like that, the seller thought it was 360 because of a nearby air cleaner.

I stuck cheap sealed power 6 pak pistons in mine and sold the flat tops. It didn't cost me hardly any money to do it. No I did not balance the motor, still running great today 10 years later.

Mine had big ole nasty rust circle about 3" around in one of the cylinders from sitting after a fresh bore and hone. I hand honed and it sealed up fine, it didn't even begin to remove the rust stain when I honed it.