5.9L Magnum recipe...

2 to 3 thousandths wear is not worth concering yourself about. You do not need to bore the block. The old service manuals talked about 10 thousandths as being the limit before over boring. Save your money and if you want, get new pistons in standard size that achieve your target compression ratio, taking into consideration the heads you end up using. If it were me, I'd get new pistons and rods, have the block lightly honed for new rings, new cam bearings and freeze plugs - the bottom end balanced and call it a day. Maybe you might need to have the block decked, but my guess is your machine shop is going overboard on that too (probably not needed).