The 'crud' at the top of the cylinder can cause you not to get an accurate reading. I would use a 3" wire wheel on a drill to knock off any carbon ring/build up and then measure with clean metal.
Did this and re-measured, still came in at 3.435. Talked with machine shop tonight that is doing the head work. They said that is fine. Pistons are always smaller than the bore size to allow room for rings and expansion.
Depending on type/brand of piston used during re-build they would machine the bore to the tolerance of those particular pistons.
Too be .005 shy of an expected 3.440 is nothing too be concerned with evidently.