Can we have a picture of the cylinder head, too?
I'd have to guess this was caused by installation damage when the piston was forced into the sleeve during assembly. Possibly debris behind a ring, Insufficient ring end gap, cracked piston land, burred ring, etc.
Was the cylinder sleeve bored with "choke", or straight walled?
Did you have a difficult time putting the piston in this cylinder when you put it together last time?
The only time I saw something like that was on a piston with a three piece oil ring. The top piece of the three piece ring jumped out of the groove and about 1/4 inch of the end folded up between piston and cylinder. This put a serious groove in the cylinder wall and the engine had a serious oil burning problem. Still, it didn't have evidence of hot gases melting the piston aluminum as the compression rings still did their job more or less. But, the example engine had cast iron sleeves, not steel like the CBs have. And, the engine never saw more than 4000 RPM, if that.
You sure have me worried about that 605 kit I have.
My condolences.