Couple comments. Good score. Saw is worth what you paid even if it never runs again. ie, value of parts.
Saw is worth fixing. There is scoring on the piston that needs to be attended to. If you run it like that, it will likely get worse. Just because the compression is good doesn't mean you can ignore it.
You may be able to clean up the jug and maybe even the piston but I would certainly pull the jug for an up close inspection.
Other comment is to verify what sprocket you have before you buy a bar/chain as it may not have the original being 30 years old. Probably .325 but might be 3/8". 16" bar is pretty common on that size saw. If you upgraded it to the Super, then I would run an 18" in .325 but lik bilong yu.
I agree. I picked up a 028 Super last summer from a contractor that tried to run a gas/ATF mix. It didn't work. The piston looked like yours. I tore the saw down and fixed the cylinder with acid and sandpaper like others in this thread have suggested.
I ordered a piston and all new rubber parts (impulse line, fuel line, both crank seals, carb kit, base gasket, carb gasket, exhaust gasket) from Northwood Saw who is a sponsor here. After a couple of tanks the rings seated and it runs like new. It is a great little firewood saw that will serve me for years to come at a fraction of the cost of a comparable new saw.
If you continue to run the saw the way it is you will increase the cost of the repair that you will inevitably do. There is a reason why the piston looks the way it does - scored. If you don't remedy this situation you will go from needing to replace the piston to needing to replace the piston and cylinder. The stock cylinders that Stihl used are of very good quality and worth saving. if you wait until the cylinder is trashed to rebuild you will most likely buy an aftermarket cylinder that isn't as good as the one you have now. Problems like this don't go away by themselves - they get worse.
If you want to keep the saw and minimize your investment I would suggest finding the source of the air leak and repairing it and replacing the piston. If you want to keep the saw and you want it to be reliable I would suggest a full rebuild with the parts I changed. If you want to run it into the ground I would keep running it the way it is until it stops. In my opinion this would be a waste of a very good saw.