That's not horrible at all.
It's hard to see if there's a ridge or not on the cylinder walls. Generally if they catch your fingernail then it's a good idea to bore, hone and go oversize.
If not then a simple light hone and new rings should be fine.
When the pistons are out you can sandblast, wire brush, or scrape all that carbon off them. Just be sure to wrap duct tape around the skirts so you don't accidentally damage them.
'89 XLT, 302, AOD, 8.8" 3.55, Pace setter ceramic shorty headers, DynoMax cat-back, 263K miles, 31" Yokohama Geolander AT+2 *SOLD and missed*
'95 XLT, 302, E4OD, 8.8" 3.55. 3" Body Lift, 31" Tires, 178k miles