Jason, I don't want to sound cruel, but I would tear this engine down and do a major overhaul. You will save lots of money if you can do most of the work yourself.Take the heads off, pull the block out, strip everything out. Keep track and take lots of pictures of your parts as you go. 90% of the work is cleaning parts.
The engine has well over 120,000 miles and I'm sure your cylinders are bell-shaped. Take your bare block and bare heads to an engine-machine shop and have him boil your castings. They will remove all the plugs. When it comes out of the tank, the castings will look like new. The next step is to determine if there are any cracks in your castings, by magnafluxing. If your castings have major issues, it doesn't make sense to continue. If everything is ok, now is the time to measure your cylinders for new pistons. The machine shop will determine how much to take off your cylinders, then he will wait until the pistons arrive before he cuts your block. Piston to bore clearance is 1-1/2 to 2 thousandths. He has to measure the new pistons in order to bore and hone your cylinders to size.
I recently went through this exact process. It is costly but you will have a brand new Y-Block, bigger and better than new. My machine shop took .060" off my cylinders, now my 292 is over 300 cubes. They could have safely taken .120" off. I also changed rocker shafts.
Check out my web site (below) and look through the pictures. My engine looked real bad with dirt and varnish, but the crank and cam looked beautiful. You will need a compete gasket set, might as well do the job once, and do it right. All new gaskets and seals will help a lot.
- Dave