I use the arm type hone with the three stones and I use transmission fluid as a lubricant to hone. I use a little Honda GN4 oil on the cylinder when installing the piston and rings back into the cylinder.
I would just go ahead and replace the valve stem seals, since it's cheap and easy to do.
After honing the cylinder, wash the cylinder out with hot, soapy water and run a white cloth through it until it comes out spotless. If it's not spotless, wash with hot, soapy water again and run a white cloth through it. Keep repeating until it comes out spotless. Then, coat with a thin layer of clean oil.