If you leave even a small scratch, it will work, but will shorten the lifespan of the vanes. When you say the gouges are up to 1/8", is that the width or the depth? If depth, check how much extra thickness is available on the housing. It likely has enough, unless maybe the bore has been honed too much already. Unless you are experienced doing this, I suggest you take it to a machinist and get it turned on a lathe. Those gouges sound like a little too much to just use a hone.
Where in the Adirondacks are you? My brother does machine work and has a lathe that can do up to 12" outside diameter I think. He is in Canastota. PM me if you want his contact info. If he can't do it, I have a buddy who rebuilt my front idlers on my excavator. He turned them, (about 13") O.D. I can also get his info if you need it. Back when I needed it my brother didn't have a lathe big enough. He now has the huge lathe and a big vertical milling machine.
Dave Klish, I recently ordered a 2x6 wood fired evaporator from A&A Sheet Metal which I will be converting to oil fired
Now have solar, 2x6 finish pan, 5 bank 7x7 filter press, large water jacketed bottler, and tankless water heater.
Recently bought another Gingerich RO, this one was a 125, but a second membrane was added thus is a 250, like I had.
After running a 2x3, a 2x6, 3x8 tapping from 79 taps up to 1320 all woodfired, now I'm going to a 2x6 oil fired and a 200-425 taps.