I'll second Awaps's comment not to touch the piston with any abrasive. On the Mk 2, the piston stem o-ring is mounted on the piston and the mating surface is in the reg body. It's that surface that is important from a seal standpoint and if it is pitted, you need to replace the reg body.
Similarly on the piston head, what is important is the condition of the groove. The piston head o-ring then seals on the wall of the cap and that is again an important surface. If that surface is pitted, you need to replace the cap.
Ideally you would replace the piston and if it were a customer reg, I'd do that, in large part because any roughness can create a place for ice formation to occur in very cold water (probably not a big concern in Singapore.) But on the other hand, if it is just missing a little chrome in a non critical area and it will be used in warm water, it might work just fine for you. (With the big disclaimer here, that it's a guestimate as I have not seen the part and that the ultimate responsibility for deciding to use it or not is yours.)
Coating the piston stem, the exposed portion of the piston head and the mainspring with crystolube will go a long way toward preventing corrosion or salt deposition on these parts and will also help greatly in preventing freeze ups in cold water.
You will want to lightly coat the smooth surface inside the cap to provide some corrosion protection as well as some initial lubrication when installing the cap over the piston head. You will also want to lubricate the piston stem o-ring and groove quite well as inadequate lubrication can cause vibration and resonance.
Lightly coating the threads on the cap and yoke retainer will also help prevent any corrosion from locking these parts together.
Over torquing the yoke nut does not have the same consequences on the Mk 2 as it would on a Mk 20 as the o-ring seals on the side of the retainer, not the bottom and the retainer does not bottom out in the body like it would on a Mk 10, 15, 20 or 25. But with that said, over torquing can combine with a little corrosion or salt deposition to make it extremely hard to get the retainer undone at the next annual service. I also agre with Awap that 22 ft pounds is ideal - enough to keep it from loosening if mishandled while attached to a tank, yet not so much as to make disassembly difficult a year and a hundred dives or so later.
In any case, corrosion inside the ambient chamber on the piston and cap is normally a sign of inadequate soaking/rinsing of these parts after diving. The large holes in the cap are to promote water and heat exchange but also to make it easier to thoroughly rinse this area. If the reg is properly rinsed, corrosion and salt deposition won't occur.
Newer Mk 2 pistons have a plastic guide that fits over the piston stem and inside the spring to keep the piston centered. I am not exactly sure what you are describing but it is perhaps possible that the piston is running a bit off square relative to the body and also that the top of the piston head may be striking the top of the compression chamber/cap. A tech would have to look at it to tell for sure.
A Mk 2 should be adjusted using up to 3 shims to achieve an IP of 145 psi at 3000 psi. This ensures the IP will remain above 120 psi at 300 to 500 psi. If the IP is lower at 3000 psi, the IP will fall out of the desired range at lower tank pressures and the flow rate will be adversely affected. If 3 shims is not enough to achieve 145 psi, a new spring is needed. Too many shims will overcompress the spring, reduce the spring's working range and create the potential for a broken spring - one of the few failures that can potentially result in a failure to deliver air. So I do not recommend using too many shims nor do I recommend making your own shims as they may exceed the specified thickness.
The Mk 2 is probably one of the easiest first stages to service. However, my overall impression in this case is that given there are potential problems with missing shim(s), a worn piston and a possible piston alignment problem, it is well worth taking it in to an SP tech for annual service and possible parts replacement. The parts and service are cheap when you consider it is life support equipment and the possible consequences of a failure.