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Valve guides

Did them that way back in school. Yes it rolls grooves in the guide to make them smaller followed up with a reamer to finish them to size. The grooves are also a plus for stem lubrication. It isn't a permanent fix but replacement guides don't last forever either.
....and if you have a high lift cam you'll start getting blow-by around 13,000 miles. No thank you. I learned my lesson way back in the sixties. Knurling is just something you do to get a few more miles out of an engine. I haven't let anyone knurl any of my valve guides in over well over 50 years.

If you want the engine to last, replace the guides and hone, not ream, them. Honing will give you a more precise fit.
 
U.K. What lead you to this point of wanting to do guides/valves? This alone will not get you much more power. Start with the easy things like carb and exh work, make the engine breath more efficiently. Installing a mild or RV cam will also help a lot. Sounds like your guide to stem clearance is ok, but change stem seals. If your exh valves are carboned up badly this will rob your small engine of power. Try reduce your weight you carry. Every few hundred lbs makes a difference. Once back together drive it like you stole it, in other words keep it from getting carboned up. As far as flushing is concerned you can flush with solvent, top up with oil if necessary, run for a few minutes than replace oil and filter. Depending how dirty it got you can do this again. If you need machine work done go to Thompson machine shop in Nanaimo, they had stellar reputation when I lived on the island.
 
Oops, missed the 318 part. If new int valves are needed, still worth getting o'size valves & going to a 30* seat. This gives you a new seat as well, whereas cutting an existing seat sinks the seat & hurts flow....

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