Hello Chris, Nick has made some very good points, as he says, steam engines are the most forgiving of model engines as they actually work above atmosperic pressure, and the first ones often had half an inch of clearance in the bore, and perhaps that much eccentricity and taper at times. I have recently just bored a cylinder for a tiny power steam engine, I used a four jaw chuck to get the bore as closely centered to the casting as possible, facing the end at the same time and then flipping it by loosening the jaw against the valve flat, and one other, putting the faced end flat against the chuck, which I know is accurate, but as you say, the second end needs to seal more than be perfectly square, so I concentrated on proper length and got that right, and it is in fact square with the bore.
I then took the cylinder and clamped a through bolt through an angle plate, the cylinder, and another angle plate, and bolted the angle plates to the table of my mill, then used a fairly accurate level to get the cast surface close to parallel to the table, and used a flycutter to face off the valve face. I used two angle plates because they were handy, and two offers much stronger support, far more against chatter than for any other purpose, not wanting the cylinder hanging out, however lacking a second angle plate, I would use an adjustable parallel, or carefully wedge the loose end of the cylinder with hardwood wedges, just enough pressure to ensure they stay in place, and not enough to tilt the cylinder up. I have used a file and dial calipers to measure the thickness of the cylinder wall to the face of the valve face on each end, and corrected a few thousandths difference with the file and finished the face with wet or dry sand paper laying on a surface plate, but the plate is not an absolute necessity, one can easily use something like an accurate angle plate as a standard to finishing, and for checking, or just a plain straight edge if you have one that is truly straight. The valve face must be pretty closely parallel to the cylinder bore, or the valve gear will tend to bind up, however a couple thousandths one way or the other can be compensated for, as long as it is flat, to ensure the valve seals well.
I use a set of magnifying lenses often a brand called "Optivisors", both for accuracy, and because my vision is not what it used to be, but they are useful for anyone doing accurate work, and I highly recomend them. Model engine builders fifty years ago, commonly finished the valve face with nothing but a file, and often took the cylinder to get it bored, lacking a lathe of their own, so it can be done quite well even with minimal tooling. For setting up your bolt circle to bolt the cylinder to the stanchion, you can plug the stanchion's bored hole with a plug machined for a tight fit, and with a "center pop" you can put a leg of dividers in, and scribe a hole circle on the top flange of the stanchion, if it takes six bolts to attach the cylinder, you can walk the dividers around, at the radius established for the circle, and careful stepping will give you an exact dividing into six, by the nature of Pi. If it calls for more, such as eight, one can walk the dividers around several times, incrementally adjusting smaller, until stepping all around puts the last leg back on the first mark. That flange can then be used to transfer the hole locations to the cylinder and also to the cylinder head, when it is machined. I think that should get you started on the cylinder, I am happy to be of assistance, I am not working on mine right now, because we are recovering from a flood over the past week, and my shop was running a foot deep, so it will be some time before I've got it cleaned up and working again, but I can sort of work by giving advise, and enjoying the work vicariously, if you find it helpful. I have a full and fairly complete machine shop, having retired from the business due to my health, but I started with a home made lathe, and hand tools, so I can adapt methods to what you have available to you, and if you do good work, carefully, you will have a very nice engine you will be quite happy to have built. I have Multiple Sclerosis, which limits my work to a couple hours a day, but does not interfere with my mind, and I am retired due to it, so what time I have, is mine and there is little effort in writing, so if I can assist, just ask, I enjoy seeing other's engines almost as much as seeing my own. Even the worst Chinese machine you can buy today is more accurate as a baseline, than the best of small lathes available for the hobbyist fifty years ago, so get well aquainted with all its warts and callouses, learn how they affect things, you will find ways around them, and eventually, an idea will pop into your head and you will remove a wart or two, and see a distinct improvement, leading to the next. I work on a 1948 Logan ten inch lathe mostly yet I have never stopped changing it, and improving it, even though it was a fine lathe when I bought it from e-bay close to twenty years ago, and rebuilt it fully. The main thing is getting to know your own equipment so you can immediately identify any issues that arise, and you will find it is absolutely true that the lathe can build its self, and is the only machine tool which can, and is necessary for the building of all others. I hope this is of some use to you, keep at it until you have all the parts of an engine laying around, and then you just put the parts together, simple, heh?
mad jack