Cylinder liner must be a bit higher than engine block to keep tight against leakage from cylinderhead/cylinder liner. 0,08-0,10 mm above cylinder block is better.
A bit gap around cylinder liner/block is not serious problem, the cylinder head gasket will keep tight if it is a "wet" cylinder liner. The dry cylinder must have snug fit into the engine block (model engine). The real engine has cylinder mounted tight in the cylinder block (cylinder freezed/block heated when mounted togheter).