Could be a crack, from the pics, but looks to me to be a normal "striation" (Surface crack on the honed surface due to uneven temps or overheated engine at some point). Good eye!
Only ways to know is to have it sonic checked, mag'd or have that cylinder over bored to see it it goes away. If it goes through to the oil or cooling passages, I doubt it will, then sleeve that cylinder. If it were that severe, you'd be having other issues, IMO.
Looks like more the latter to me, a striation, but still a crack that needs dealing with eventually. (Most catastrophic cylinder wall to block cracks occur perpendicular from the stroke, not parallel to it, just FYI, not all, but MOST).
EngineDoctor or Paul at Lakes Only would be who I'd wait on replying, and it could be just as GT said, or require a sleeve in that cylinder. Not the end of the world at either extreme. Personally, I think a slight over bore (.010) will be the end of it (New pistons will be required, of course.) Or over bore that cylinder for a sleeve and you can re-use your pistons.
I could be, and have been a few times, wrong, but I think you're ok here. Nothing to get overly concerned about.
Ray
