[SpudRider]

I don't see a hole in the cylinder head. Are you talking about the chip/indentation located at 1 o'clock in the photograph below?



If you actually have a hole, you can patch it with JB Weld, et cetera. Otherwise, you don't have any problems.

Have the machinist bore and hone the cylinder to match the smallest oversize piston you can find. You can order a piston for the Yamaha TW200. Besides the oversize piston, I suggest you order new piston rings, gaskets, and valve stem seals. I also suggest you have the machinist clean the cylinder head, and lap the valves for you.