Is it as bad as I think it is?

Sorry for the bad image quality.

The image is of the top of piston 4 and the cylinder wall in a Toyota 2AR-FE with 162,000 miles. All Toyota recommended maintenance was performed throughout the engine's life. I have the feeling those recommendations were written by marketing people and not the engineers.

Based on what the image shows, the engine needs a short block. Am I correct?