2000 RM125 top end fried. Need Help.

My son blew up his motor this weekend. I took off the head and sure enough, the piston was fried and the ring is toasted to it. He took it apart so I didn't see how he did it. The rod and bearing seem fine. My question is. Does the crank have an oil chamber? There is coolant and oil mixed around the crank. I drained the gear oil. It was fine. The bike was low on compression when it stopped running. Should I just tear it down and put a new piston and ring. What should I do about the scars in the nickel cylinder? Is it toast or can it be resleeved?

what about all the fluid in the crank chamber? Do I just empty it and leave it dry or does some fluid go back into it? I thought it was a dry system cooled by the liquid cooling system. Also, to take the motor out, pulling the swingarm bolt, do I need to remove any other suspension items before pulling the main motor mount through the swingarm? Will it cause me problems later?