Pitted cylinder wall from crack in head

 Cylinder no 3 is pitted due to a crack in the head. I've got a new decent 1.6 head to install, but I'm not sure how bad this pitting is?  The compression was normal in all cylinders, but this one didn't fire until the engine warmed up.

I'm going to swap the engine for a DX when I have the funds, but would like to sqeeze a bit more life out of the 1.6 block if I can

Hard to tell just looking at a picture but if the compression was ok before I would clean up the engine block bores and stick your head back on and see what happens/check compression again.
If you are going to swop the engine out at a later date you have nothing to lose.

I had the same issue on a 1.6 GTI. Ended up getting it rebored. As above suck it and see with a new head and gasket....