There's a chunk of aluminum missing from the surface of my LS1 cylinder head. In the picture below it is located on the edge of the rusty looking cooling jacket port.
Is this something to be concerned about? Is it repairable?
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This, in and of itself, is nothing to be worried about. The reason I say this is, it is not part of the sealing surface for a cylinder. There is more than enough meat there to seal the cooling port, as long as there isn't a crack from there radiating out.
You will most likely want to have the head resurfaced, even if it is only to clean up the mating surface. As @DavidLively rightly stated, the surface appears a bit rough. When you do this, have them radius this area a bit just to clean up anything which might cause a stress riser. They can check to see if there are any cracks at that time.
This isn't something I'd be worried about given what I've said.