Well, you've posted quite a few questions, so I'll give you my opinion/perspective on them as best I can:
C/R - depending upon which pistons you choose, they will either lower or raise your compression ratio due to their dome design. Many of the CI pistons are actually a lower CR than the stock pistons in your motor.
Decking to raise CR - That's an option, but that requires a fair bit of knowledge and proof-testing to confirm piston-valve clearances afterwards. And the pistons need to be viable if relief cuts are required.
Shadowing a machinist - If you choose a shop, leave them alone. If you believe you can stand over their shoulder and tell them how to do their job, I imagine they'd tell you to GFY and toss you and your parts out of their shop. Do you know how to machine a block? If not, stay out of their way and let them do their job. Any competent automotive machine shop can bore a cylinder accurately given the correct information (i.e. piston-cylinder clearance, piston diameter, etc). Hand them your pistons, rings and cylinders. Provide them the details from the manufacturer about the clearances. Disregard "internet advice" about how much to use, or why to use it. You're not building a race motor as evidenced by your product choices.
DIY Machine work - Nope, nothing is impossible. The only real question is: can you do it? Do you have the equipment, knowledge, experience and competence to do it. If yes, then knock yourself out. If no, then pay up, Sucker (as the saying goes).
$900 - That's not a "race head". That's a rebuilt head. A "race spec" head would be about 2-3x times that amount of money. It would include new springs, retainers, all new guides, all new valves, extensive porting, machining, and flow bench testing.
Slapping larger pistons and a 650 cam into a 550 motor does not a "race motor" make. It will improve it's performance, but not sufficiently to equal the performance of any modern single cylinder 300cc japanese street bike. And not even within the same realm as a modern 500-600cc bike. So just be sure of your expectations. You may end up with mid-40s BHP after your efforts. Call it an additional 10BHP objectively. That's nothing to write home about, but also will make a vintage bike fun to ride. Just so you're aware...