So for an 1/8" nominal section which is actually 0.139"
Groove depth of 0.132" and Groove width of 0.160"
Jasonb has given you groove dimensions based on his experience and they sound good to me also. Just remember that the piston radial clearance measurement is also part of the groove depth. So if you have .002" piston clearance per side, the actual groove depth in the piston should be .130", which gives a 5% crush.
O-rings are fairly forgiving. nominal compression of a size 214 o-ring for up to 1,000 psi would give it about a 12% crush for dynamic applications (.122 deep x .190 wide), but as Jasonb said, that is too much for your project and would just make the piston too tight and would wear the o-ring out faster. The shallower the groove, the wider the groove needs to be so that the squished o-ring has somewhere to go and doesn't just bind everything up. Also remember that you can always make the groove deeper, but you can't make it shallower, LOL. The piston and o-ring combo should move with very little resistance in a polished bore.
You probably got the usual 70 duro Viton. If you have problems you do have the option of going to a harder (90 duro) or softer (50 duro) Viton. like I said, o-rings are fairly forgiving.
Lloyd
P.S. There is always the option of back-up rings for very difficult applications, but that makes the groove much wider.