Mike,
The piston sizes actually are the sizes for the cylinder bore itself–the tolerance is pre-built into the piston supplied. Thus, you machine the bore to, for example, 54.20 and order the piston that corresponds to that size. The piston will not actually be 54.20, but will be slightly smaller. The green piston would be for a bore of 54.20 while red is slightly oversized, bore = 54.201.