Yes, this engine can be rebored and rebuilt, but is it worth the cost. Here are some questions you need to have answered before proceeding.
1. What and how are you getting your reading. Cylinders should be measured at three positions, (top, middle and bottom) plus you should take two readings, 90 degrees apart, at each location.
2. Valve guides can be reamed oversized, but make sure valves with oversized valve stems are available yet.
3. Have you measured the crankpin and connecting rod journals and bearings, making sure they don't need replacement.
4. Have you priced out the cost of your repairs, is it cost effective?
5. This manual might help you out.
I've rebuilt these engines many times in the past, when prices were down, and didn't need reboring or resizing. Used to do my own reboring if needed if customer wanted it done. You need to ask yourself, is this engine worth the cost of a complete rebuilt. Also, ask yourself, if I leave something's out and the repair doesn't last, was it cost effective? You have a tough decision to make.
http://www.mymowerparts.com/pdf/Tec...P-4-CYCLE-L-HEAD-FLAT-HEAD-ENGINES-692509.pdf