Yes if you can push the piston up past the top of the sleeve there is not enough pinch and a new piston and sleeve are needed, or some people have the sleeve re-pinched but I've never tried that.

You can break the engine in on 10% nitro just fine, but a general rule is to always run the engine on whatever percentage you broke it in on. So if you break it in on 10% fuel keep using 10% with it. Make sure it has the correct oil content though. Also you don't add after run oil to the fuel, you put it in the engine after you're done running it.