Ignore any HP difference between .030 and .040 oversize; it is 100% trivial for what you are doing. I'd stay with .030" or .020" in case the cylinders had some core shift when cast. IMHO, you are not at a power level where .005-.010" extra wall thickness will make any difference either.
Wait on the piston size decision. Take the block to have it cleaned and bored, etc., and ask that the bores be measured first, while you are there if possible so that can be settled.
Make sure you agree upon the piston size upfront and order them pronto. Then take them right to the machinist; let him have them in-hand for final measurement when boring/honing.
The crank balance changes from the under cut, BUT is then compensated with the extra material thickness in the undersized bearings. So that is a non-issue for balance per se.
Make sure in your balance thinking that you include the pin weights. Ring weight will be a tad more with the oversize rings... a gram or 2 or 3....
Cleaning rarely fails to remove all paint. Don't remove it yourself; just a waste of your time. Pull out the core plugs (freeeze plugs). 'Hot tanking' is the norm. If the inside of the block is very rusty, then 'rust tanking' is done at some shops as another step.
Take the main caps with you to the shop and ask them what you need to leave with the machinist.
Be prepared to clean out all threaded holes after you get the block back. That is more of an 'assembly detail'.
