These engines start life with a 3-3/16 bore and a 3-3/4" stroke (239cid) and can easily go to 3-3/8(usually, and some can go even more) - but I wouldn't if it's the first rebore. My last flathead went to 3 and 5/16 +.030 with a 4" Merc crank for about 280+/- cid displacement. The optimum is a "3/8 x 3/8" which is about 296 cid. With all that said, I would probably do the 3-5/16 which is your .125 overbore. It's safe and proven. Of course with that said, there still is the old rusty corroded/eroded water passage internals problem which may lessen the ability to go that far unless you have had a sonic check -