Water in cylinder, now rust, now what?

Found some water in cylinders in old 318 I'm installing. Took cylinder heads off and overnight soak in Liquid Wrench got things moving again. However, one cylinder has a small trail of rust leading from the top of cylinder down to end of piston travel. The top ring seems to be bumping into this rust. Can I use some wet/dry sandpaper to clean the rust from the bore? Three tries with Naval Jelly did nuthin'. Thank you.