Firstly. You said the po told you that the engine was bored .040. Then you said that that wasnt the case that the engine has just been honed. If the engine was just honed, then a .030 piston is the next bore size up. Then .040, then .060. For a street car running A/C, .060 will potentially cause the engine to run too hot, but it has been done before. I guess it all depends on your cooling system.
Nextly, I dont know why youd expect the engine not to need rebuilding since you started the thread with no back story as to where, or who you were buying it from. Any old pre-90 windsor engine of questionable origin is gonna need it. Especially if it's over 100k miles.
There is an ongoing thread about offshore heads..a few here have bought some. From the way it looks, it may be a " hit or miss" chance that you'll have to take.
Last...for that machine shop to tell you that the head is that bad would have me taking them to a different shop for a second opinion..its one thing to have to replace a valve here and there, but all 16?
The seats are usually cut, and guides are usually replaced. I'm wondering how did different size springs get on there, and how many are different? Again, I'd figure maybe something in the past might've gotten haphazardly replaced... but all 16?
Get another opinion.