I'd agree with Chip, check the big end of the rod and the rod journal on the crank to see if it's worn that could be causing the piston to be that deep in the cylinder BEFORE doing any machine work.
Now, they can definitely be in the hole that much from the factory, (especially blocks from about 8-10 years ago, shortly after the LO206 was introduced and they started keeping track of piston pop-up on the 206.) When the L206 short blocks were hand sorted, anything that was out of spec became an animal engine, same with cylinder heads. Today, they are all very similar, but I still find the new animal engines have pistons in the hole. I have a couple brand new animals here that I disassembled to rob all the parts off of to substitute a sealed LO206 shortblock just to make complete 206 engines for customers who have been waiting for several months for their engines. These animal engines have the pistons in the deck -- albeit not .011," but I have definitely seen them in the hole that much before.
OP, Check that rod journal, then get that block on the mill before you hone it and get it to about +.0035" for WKA rules. That allows a small cushion for rod stretch.
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Thanks and God bless,
Brian Carlson
Carlson Racing Engines
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