Trim the solid copper gasket till it fits correctly or buy another..bin the composite gasket...
The top groove of the piston was not fitted with a ring...The grooves function is as a 'heat dam' to reduce the amount of heat transferred to the top scraper ring....
The exhaust valve seat in the barrel and the corresponding face of the valve should have smooth, unpitted and undamaged 45 degree seats...
If they haven't you may achieve this by lapping in the valve with medium and then fine grinding paste...
If the seat in the barrel is too pitted for you to do this by lapping alone the seat can be recut by an engine shop...Likewise if the valve is too bad it can be refaced by an engine shop who will clean up the face on a valve grinding machine....
BUT!!...The valve should not sit below the gasket surface of the barrel after the work is done...If it does a new valve seat insert should be fitted to the barrel to restore the valves position...
ALSO!!...The valve has a 'lip' or short parallel section between the seat and the top face of the valve...This MUST be a minimum of .030"-.035" wide to avoid the risk of burning the valve due to overheating of the valves edge...
I'm also assuming that the stem isn't worn...If it is the valve (and possibly the valve guide) will need replacing anyway...Ian
email (option): ian@wright52.plus.com