In case it hasn't been mentioned: If you do go with the re-build kit from Engines Australia, buy all new OEM oil seals to replace the ones that come with the kit.
I spent a few days after the rebuild sourcing leaks that were all attributable to those eff'n aftermarket seals. Maybe it was just my bad luck. But the OEM seals are best and are cheap insurance...
Best of luck.
P.S. You could afford some sweet pistons - if you finished those windows....
HUmm, thanks Shred. I hate oil leaks, will be using the Mr T ones for sure then, thanks for the heads up.
What about the O rings and crush seals? Were they any good?
The 60 windows are basically "finished" Having the first set cut now. With how expensive those damn parts are though there would have to be WAY more of a profit margin to help pay for pistons. ;p
I'll post the parts breakdown soon.
cracked precups like yours are very common, and most shops like you stated wont change them.
they can easily be knocked out with a punch down the injector hole like you stated, the head milled and the preco's installed and checked to see how proud they are, i believe they are allowed to be up to .002" or .003" proud but your FSM will confirm that
we mill most of our heads with the preco's in, it involves a good tip, a little oil/atf fluid/crc on the preco and the right speed. allthough i have had to use a surface grinder on a couple of larger heads.
have you checked the head for straightness/warping yet to determine if it does need machining? also are you going to have it crack tested?
also a little off topic but can anyone point me to a thread where a 1hz has had the precos come apart and kill a motor?
Good to know about actually being able to knock them out. I was concerned to just give it a shot since I've also read that the most likely place for heads to crack is from the pre-cup hole.
The recession or protrusion on the cups can measure +- 0.0016" So, pretty much flush.

I don't have a straight edge that I trust enough to check the length of the head for flat, will wait and see.
As for a story of HZ cups coming apart and affecting the motor, I can not find any evidence of that. I did come across one mention that someone thought they were loosing coolant through a cracked precup and head gasket, but that was not backed up with anything.
It seems to be an issue of opinion.
Most of the destroyed engines from dropped precups that supposedly litter this forum are 3b's.
Have not seen a HZ yet on the forum destroyed by a dropped precup....
Can't find one, lots of Bs, but then again Bs are older engines, maybe given more time it will be an issue that starts to pop up with the HZs as well.
I've spent a lot of time digging through Aussie websites as well though without finding any evidence.
Well if the 1HZ is immune from precup droppage then run the cracked ones, by all means. Everyone here is correct, indeed I can't seem to find a 1HZ on the forum

that was destroyed by such...
Still from your pics
if there is a difference in block overhang between the 1HZ and the 3B its very slight.
How is it that the sort of guy who would stress about the process used to resurface his head would reinstall it with cracked parts?! I don't follow the logic.
Now now, I was just curious what process was used to level the head on the B.

From Doorslammer's response above it sounds like the HZs cups can be cut as well, but from the sounds of it most shops don't want to risk their cutters.
As you mention, there is only a tiny bit of difference between the HZ and B cup profile though.
To me, if I have to level or machine the head, I would want to pull them, just don't like the idea of cutting dissimilar metals together like that, especially when the clearances are 0.001" Not to mention that a cut would remove material from an already weak cup.
Thanks for all the insight from everyone, helps to weigh the opinions.
$100 is not much compared to the rest of the project, but it's still $100.
If the HZ cups are just going to crack as soon as new ones are in there, it might be a $100 wasted.
Knowing me, I'll probably end up replacing them anyway, but I like to agonize about stuff like this.

KR