Not a bad idea to check it out first. I wonder how many hours these air cooled single cylinder Honda motors are good for? I was thinking 2,000 hours? Possibly more?
If the cylinder is wore you can have a engine machine shop bore and hone it for around $50 but you will also have to buy a new over bore piston and rings, not sure what that would cost.
Did the motor get like this over a long period of time or rather quickly? Also how often do you change the oil?