It depends on what you want from the bike.
The "right" thing to do from here, is to get a rebore - and it might take a couple of rebores to get all of the rust pits out.
You'd also thoroughly check out/clean up the crank, & conrod. The main bearings, small-end bearing, gudgeon pin and big end bearing, should be replaced if there's any sign of corrosion on them.
Then you could rest easy, knowing that the engine is without problems.
There are many other, simpler/cheaper paths to take, if you're prepared to live with a less than perfect engine.
The simplest path that I'd be happy with for myself, would be:
Check the bearings for any corrosion, or excess slop. Assuming that you find none, give everything a really good clean. Give the bore a scuff/hone. Re-assemble. Ride.
FWIW, I have an IT125 barrel with some "interesting" rust pits in it (the bike it was fitted to, was leaned up against a shed for several years, allowing moisture to get in). The barrel and piston were simply cleaned, and fitted to another bike that did a season or two of HEAVEN racing before I ended up with it. It was down on compression, but it kept on running.
Like I said, it depends on what you expect from the bike.