Measure the cylinder in 6 places like the Kohler manual says and report back with your findings.
You also need to post what tools you used to measure the cylinder.
One thing you need to remember when rebuilding/replacing a piston and is the cylinder will grow in diameter when you hone it. I've been a machinist for close to 40 years and saw enough poorly done rebuilds that I could write a book.
The silver sludge in the pan is another indicator that the motor needs some major work done to it. I would recommend you check the crank pin and rod journal to make sure they are in spec. Crank pin should check in 6 places per Kohler manual.
You also need to post what tools you used to measure the crank.
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