My opinion, (bearing in mind I'm new to these bikes, and only just rebuilt the top end on mine), is that mainly rust I can see in there? If it is just the head gasket that has leaked water into the cylinder, don't panic quite yet. Lift the barrel, if that piston is stuck in the bore, pore some paraffin or diesel down the bore and leave it a few days to free it. Be careful that you don't drop too much crud and stuff down into the crankcase when you lift it. Always a good idea to push some rags into the opening as you lift the barrel.
It's possible that the bore can be honed by a local machine shop, or even using a hone attachment yourself. Get some new rings, and clean the piston up.
You must get the head and barrel checked for flatness on the mating surface too, it may be that a warp caused the problem in the first place.
Of course, I'm just going by what I can see in the pictures, is the piston actually damaged ?
Good luck, and like I said, don't always expect the worse, (if I had with mine, it would be in the canal by now
).