Assuming that the clearance is due to the step in the domes and not a negative deck height (piston in the hole at TDC) you can probably use fine sand paper and a piece of glass or marble and shorten the step on the domes. If it's negative deck though there may not be enough step there to take it down another 0.01" or so. It the step is too small the oring won't stay on during installation.
The head should be ok. Make sure there isn't any metal or porcelain embedded in the head. A good used stocker is cheap enough, though, that I'd just replace it.
You can use silicone on the studs and get away with the open flange nuts as long as you're not bottoming out the nut on the unthreaded shank of the stud.