The ring gap when the engine is fully assembled will be visible. It will be about 1/64" or so, and t his allows for expansion of the ring when the engine gets up to operating temperature. Piston rings are made of very brittle material, so if you try to rework one, you'll only wind up breaking it. It's not very workable at all.

Usually, when the ring gap is too large from wear, it's the ring that's worn and not the cylinder sleeve. We've honed sleeves with brake cyliner hones in the past, but only very lightly. If you use 600-grit or finer sandpaper, you won't remove enough material to matter. Compression loss is more likely through a bad fit of the ring to the piston than a result of a bad cylinder-to-ring fit.