You've got a few things going on here. I'm just trying to kindly explain some things. Sorry if I get you offended but I'm only trying my best to help :)
First, I need to tell you, that piston and at least the cylinder head dome are toast. I would consider tossing those items away and get some new. don't mess around with that dome anymore.
Second, its obvious water got down into the Engine. You need to clean that out really well. If its starting to rust, and while you have the cylinder off - I'd recommend cleaning, drying it out, and then FILL the crank case with some DIESEL fuel. We actually do this on sunken skis when we cant get the started - the diesel will displace the water and keep the bottom end healthy until
Engine can be fixed.
Third. Water in the mix caused the piston and cylinder to scuff sides pretty badly. Simple - lack of lubrication caused by water ingestion. You need a new piston, and the cylinder needs to be cleaned up and honed (Hopefully not bored again).
Forth. Looking at your piston crown I see whats going on. The lighter grey/brown/white spots are signs of pre-ignition. This happens under 2~3 cases - Mixture too lean. Not enough fuel octane. Squish clearance was set way too tight. In all cases, this would put a lot of stress on the piston, as well as the corners of the cylinder head/dome. This is probably what caused your dome to fail - heat against a very small ammount of material. From there the coolant was fairly free to enter and cause havoc.
So to summarize_
1. Treat your bottom end to a DIESEL bath
2. Prep your cylinder to a;
3. New piston
4. Get a new head
5. Set the squish band properly (Between 45 thou to 80 thou depending on CR, compression, and octane used)
6. Rip/ride another day
Sorry to see your troubles my friend