Mark on cylinder wall?

This Mazda F2 2.2 engine looked really good aside from an old crusty head gasket and coolant leaking through 3 & 4 exhaust ports. Refilling the radiator was getting to me and I burned my hand through a leather glove after picking up some free Roxul on CL which was kind of the last straw. 260k on the odometer but I don't know if it's the original engine. Interesting tidbit the forklift version of this engine comes with an aluminum timing cover and chain instead of a timing belt.

Have you seen marks like this before? I can't feel anything and I'm not sure if I can see the other side of the cylinder to check for rust or cracks etc.

The stains were probably caused by coolant interaction with the cast iron block.  I've seen them many times before.  They will not affect your repair.  Meanwhile, you have quite a lot of cross-hatch left and minimal scuffing so spend time to make sure your head/block interface is as good as possible.  Have the head surfaced lightly for a good seal.

Can you feel any depression around that area with your fingertip or fingernail?  If not, don’t worry about it.  Crosshatch still looks good as Jerry noted, so probably can’t feel a depression I’m guessing.

Engine must have sat for a while and condensation made a rust stain.

I wouldn't worry about it.  You'd hurt things more trying to hone it out than you'd be hurt by leaving it alone.