thats only minor damage to the piston, very likely the cylinder is easily cleaned up and reused. I have learned the hard way its best to fully disassemble a saw to thoroughly clean every thing and replace every gasket, seal and bearings (have them on standby just incase) while your doing internal repairs. It's far better to go the full distance once and complain about parts costs once than to do half the work and find other problems shortly after completion. People very often overlook cleanliness on saws resulting in debris entering the engine where it then causes damaged bearings/cylinder/piston skirts etc.. A good high quality teardown and rebuild will last many many years of hard everyday use. Every single saw I have torn down I have found something that needed attention-- hardened seals, pitted bearings, sludge/trash accumulation in the crank case, pulled threads or damaged fasteners, peeling paint inside the case etc that all will cause problems or catastrophe at some point. What you do or do not do now will always affect the saws future. Run 40-1 and use a tac to adjust the carb!