that is quite worrying and I would like to figure out exactly what exactly caused the chip. my one theory is that the liner expanded at that section and the piston started making contact and eventually chipped. But yea, Whoever put this together previously was a bit of an ape and made a lot of little mistakes like using silicone glue to assemble the head and stripping a few threads so not completely unlikely that they broke it. The liner bore looks completely fine at least (will get a picture when I'm tinkering again). I got the suggestion of welding the missing material back on the piston and sanding it to the correct shape. Is this a viable solution?

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