HI Sarah,
In practice a blowhole that size, if a blind hole, will have no huge effect on performance aside from damaging piston packing . If you use a single o-ring, which is very narrow, there is also the chance of momentary blow-by wasting a little steam.
I assume your piston is already a decent fit. If so, you don't wnat to change the bore and have to make a new piston. there is no great stress or mechanical function to this repair – just plugging a potential leak and making teh wall smooth so it doesn't damage cylinder packing.
I would not use a liquid product, but fill the hole with a small blob of Isopon P38 body filler, slightl;y proud (mix a larger amount to ensure you get a good even mixture of resin and hardener). Allow it to partially cure, but before it is rock hard use a straight, sharp edge (the corner of the shank of an HSS tool would do) to scrape the filler level with the cylinder wall without removing any metal. The ease of working P38 is why I suggest thios 'cosmetic' material rather than the more structural JB Weld.
Once hard you can, if you like, ligthly go over the patch with a light abrasive, but beware of damaging the cylinder wall.
Joey