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If the cylinder is still out getting replated you could have them skim .5 mm from the base. Then use base gaskets to dial in squish to 1.0-1.1 mm

Good luck with the bike ODG. I've got a couple of years on you, but still enjoy thrashing my MX two strokes at age-appropriate speeds and risk levels. Once you get it up and running, I think you'll enjoy playing with the 125. It's a good platform, just in need of some carb/motor fiddling to make it really enjoyable.

I currently still own an 03 CR125 and trail ride it on occasion.. Unfortunately the motor went south years ago....but I do still remember how I had it set up. Drop a tooth on the front sprocket to a 12t....or find a 53t or 54t rear sprocket. Stock reeds (or a set that is the softest) offer the best "roll on power". Pipe spacers work really well to lower the rpm "hit", but the spacers that make any noticeable difference start at 10mm...the studs in the cylinder for the flange aren't long enough to fit a 10mm spacer...so it's not...

They are different motors, but we have an '07 CR125. The kid we bought it from (thankfully low hours) had put a lawn mower spark plug in it to get it to run because the jetting was so far off. We did a top-end overhaul and bought a JD Jetting kit and lived happily ever after (bike is used for MX). I'd work with the Mikuni before junking it. Our bike runs really well with a Pro Circuit pipe, JD Jetting and is otherwise stock in the motor department.

A flywheel weight and a big long silencer will tame it down. Other options include a G2 throttle tamer, smaller rear sprocket etc and retarding back the timing a bit. If the TMX38 is in good condition and is jetted well, then it will save a lot of time and faff to leave it, as opposed to fitting a PWK and having to get the jetting right. I'm not sure that 2mm smaller on the carb bore is as significant a change as people think