...................... its at .030 now freshly machined and he says the machinist told him its not a problem.
     Lets' preface this response with the reminder that the world is a less than perfect place; Ford Motor Company never had nor presented the idea that one should be "rebuilding" this engine (rather their plan was/is that you should be buying a new vehicle!  

); and so here we are, with a block that shall we say in away is showing it's age.   

     The presents of the pitting is less than ideal but in all reality, particularly being located so low in the cylinder, I wouldn't think that it actually is going to cause any great problem.  And I have definitely seen worse, both in sum of and position of, in service functioning without creating any alarm.   

     The other consideration is that it appears that the block has already received the other machining operations of the adjacent cylinders, deck and the perhaps even main bearing bores; all of which, dimensionally, may be effected with the sleeving operation, so then what?  And also realize that this process does not present a cylinder block of the same integrity as without, so although sleeving a cylinder bore is a common practice, generally with "acceptable"* results, the thought that one can 'just' sleeve any block and 'always' reap an acceptable outcome is not always so!   

     So, this as actually better defined as a "salvage" operation in the re-machining of critical surfaces in an old cast iron block, expecting "perfection" might just be found to be expecting more than what one often actually reaps.    

     Scott.