Hi Joey.
I had a look at one of my i/c engine books (miniature internal combustion engines by Malcolm Stride).
And according to his reference you could use the following :
Cast : LM51
Machined from barstock: HE 15 OR HE 30.
For small compression engines (Diesel ) He recommends cast iron but no spec supplied .
I imagine these designations change from one country to the next etc so you may need to search for an equivalent on the internet .
There have been many articles in Model Engineer regarding engines so try there .
Alternatively try the MODEL ENGINE NEWS website as they have masses of info on many types of engines .
With a 40MM bore i would guess that you are using piston rings ?
Are you sure that it is not them that is seizing in the bore (ring gap too small )
And if you are using rings try a little more piston to cylinder clearance say 3-4 thou .
Are the pistons oval ? Should be smaller accross the wrist pin (gudgeon pin hole ) to allow for deflection or any flexing .
Ian