Block decking requires test-fitting the crank, rods, pistons and bearings to be used. A measurement is taken to determine the distance between piston at TDC and block deck. That measurement is recorded and the engine dissassembled again. Then the deck of the block is cut by that much. This is called "zero-decking" the block. Any more than that and the pistons will stick up past the block deck at TDC.

If the rust pitting is not where the head gasket seals off, then it is not a problem. As long as the rust pits don't compromise the water jacket or something weird its normal.

Preaching the Hot Rod Gospel according to the 4-stroke apostles:

Suck, Squish, Fire and Fumes