It's also worth noting that if the valves are 'pocketed' into the top face of the barrel it's best to consider having the seats replaced...Pocketed valves reduce gas flow and the M20 has little enough performance as standard without squandering any.....
The hardened seat will also considerably extend the service intervals on the exhaust side...I have plenty of personal and anecdotal evidence that these engines will run fine on lead free with standard seats for local work or limited duration runs but personally, I found that long motorway runs at cruising speeds led to seat/valve problems far more quickly so I've been replacing the exhaust seats as a matter of course for decades...Ian
0.003” should be fine. Don’t go any tighter or the seat could close in on itself. With an iron head/barrel the seat should grow with the head at a similar rate. Just make sure you have a very clean finish on the bore for the seat.
What seats are you planning on using? The AE 6000 series are supposed to be good. Fondera sell the Martin Wells seats, but they can be tough to cut. They did say the last time I visited that they also have a range of seats better suited to cutting rather than grinding.
I was thinking of using powered metal seats from Kibblewhite here in the USA. I normally use nickle chrome seats and have heard the powered metal seats can't be cut and need to be ground. I have also been told you can cut them so I don't know who to trust. Luckily I have a seat grinder if they can't be cut.