A friend of mine builds serious circle track motors and has no problems running sleeved motors. I suggest you get another opinion from a different shop. What is your machinist rationale for saying they egg-shape?
I called up my buddy and he said he install his sleeves (chilled) with an .0015" interference fit. You'll also have to have a lip at the bottom of the cylinder as a stop for the sleeve. He also warms up the block with a torch prior to installing the sleeve. I'd find somebody that knows how to properly install a sleeve and use your existing block, assuming everything else is in good shape.