Lots of Jap piston conversions of old used to push bottom of transfers above the piston crown at tdc. Decent tuners, with suitable tools, used to then lower the bottom edge to match, however, plenty of conversions were left with the bottom of transfers above piston crown and they ran perfectly well. The main thing that you don't want to do is to leave the bottom of the exhaust port above the piston crown at bdc as this tends to super-heat from the passing exhaust gases. I know of at least one UK tuner that regularly takes his exhaust a number of mm lower than piston crown and his tunes have been respected and run reliably for years. What you really need to do is determine where you can best place your transfer tops (120 to 125 is good for most use, you can go 126-130 for higher rpm use but this will knock lower rpm power) and then raise the exhaust port duration to suit the rpm range that you're looking for. Inlet timing is not so critical but you want to ensure that ring pegs are not exposed by the top of inlet port (remove manifold and look in at bdc).
What you're facing is the same as everyone else suffers when using the crappy iron lined alloy cylinders... yet plenty of them run OK. NB: The liners are frequently soft and wear out quickly with the chrome edged piston rings. As such, don't widen the exhaust port or this will simply speed up the wear rate.
These barrels are IMO really badly made, poorly finished and look crap, however, I've known a tuned 175 of them to do many thousands of reliable and reasonably quick miles... so it might still be a good option for you at this time.
Then seeing where your ports need to be for suitable port timing, don't forget that you need to end up with a method of achieving a suitable squish clearance. I would aim for 1.5mm (certainly no less than 1mm and no more than 2mm) then see if you can do this with a combination of base packers, head gaskets and/or machining of the head. Compression really wants to be about 8:1 geometric for general use and 9:1 if you intend to raise the exhaust a little (note that these figures are combined combustion chamber + squish band volume, not combustion chamber alone!).
Good luck.
Adam
Edit: Please note that the above is based on my own tuning work and results, which I note is fairly limited when compared to some of those that post on here, who make their living out of tuning, have dyno, etc. My suggestion will get you on the road and give you a very usable performance return for little effort/cost... don't expect bragging rights with dyno BHP figures though
