Is it air-cooled or water-cooled?  (mid '83 is when they changed to the water-boxer isn't it?)

I don't know much about Type 4 engines, and even less about water-boxers, but it sounds like you need to scrap the head and get a new one.  From everything I've ever heard, the valve seats of air-cooled Type 4 engines are one of thier weak points, and if they come loose once, they will probably come loose again after being repaired.

Fast German Auto advertises rebuilt Vanagon engines (air and water-cooled) with new or rebuilt heads . . . you should be able to get a new head from them if you can't find them anywhere else.

If the grove on the piston isn't too bad, and you don't want to rebuild the entire engine, I'd get rid of any sharp edges around the damaged area (sharp edges become hot spots during combustion), put a new (or good used) head on it and see what happens . . .

But of course the "best" thing to do is replace both heads if you have to replace one, and all four pistons and cylinders if one is damaged . . . and if you've gone that far, it just makes sense to split the case and check out the condition of the bottom end.  That's the best thing to do, but it's also EXPENSIVE . . . of course the "cheap" way out might end up being more expensive in the long run.