The "Freak" has given you the best suggestions.
The more compression you get out of it the better. Cut the head until the valves are just touching the head with no gasket.
Here are a few more "Rhovis" suggestions:
ut:
A slight blend at the top of the cylinder on the valve side only that extends down to just above the ring travel will help gas flow. Back cut the valves. Take the block to a machine shop and have them hone the cylinder so it's ROUND.
ROUND
ROUND
Round with in a "tenth" (.0001")
Then get .005 oversize rings and file fit the end clearance. Get a new stock rod and new piston.
Remove the oil dipper from the rod and knife edge the crank. Polish any casting flaw off the parting line of the rod and fit the bearing clearance to a round journal. If you really want to get carried away have the machine shop gas port the top ring land. Take a die grinder and remove metal from under the piston to both lighten it and to create a heat dam. Paint the inside of the cylinder head with high temperature paint. Better yet have the head ceramic coated to retain heat. You can also remove every other fin on the head to help build heat.Install a sintered metal filter in the valve spring pocket to keep oil in the crank case.
And that's just touching the surface. Cam work and ignition work will also yield results as well. Don't let anyone tell you these little things can't be made to perform!!!
Oh and don't forget to have the crank balanced by an shop that knowns how to calculate the bob weight.
Have fun and be safe is the best advice Rhovis can give ya.