Make sure the shop will machine to the proper clearances -- about 0.001" for the pistons and ditto for the crank oil clearance. Most shops used to American engines may be reluctant to leave so little clearance on the crank mains (since most Americal engines cannot be rotated with oil clearance so small!), but any good diesel shop will be used to them.

You can use either standard or oversize pistons, whichever is cheaper.

For sure if the engine failed due to oil starvation I'd replace the pistons -- most likely ruined and not worth the chance of rapid failure from re-using them.

Peter

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1972 220D ?? miles
1988 300E 200,012
1987 300D Turbo killed 9/25/07, 275,000 miles
1985 Volvo 740 GLE Turobodiesel 218,000
1972 280 SE 4.5 165, 000 - It runs!