Erik,
Typically, the liner should not need substantial machining at the top when replaced. The 0.125" lip that stands proud of the muff on top is the sealing lip for the head and with luck, the muff, when fitted to the head, will seal on head. This is assured by the grinding & lapping method described in Richardson.
When I have aluminum liners made for my bikes I usually have the lip made at 0.126" tall or taller so that I can match it to an original head, which may have been worn down a bit. I usually measure the recess in the head to make sure I can seal everything up as planned. If the lip is too tall I can machine it in the lathe for correct final fitting.
In summary, the final machining is done by grinding and lapping.
David