you have to use your own judgement, but if that was my master cylinder i'd smooth out the damaged place carefully with a round file, then clean the bore and use it. that's assuming there's no damage further down the bore from corrosion or whatever.
and as lrutt says, you've got to take your caliper apart and clean it. lots of info on that if you do a search.
the caliper bolts have 8mm hex heads. if you put the caliper in a vise, you can use a hex bit socket, a breaker bar, and say a foot of cheater pipe. you can lean into that setup and apply a lot of force smoothly. i found that to be a good way to get the bolts to break loose.