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No problem running on air like that, I leave the ring off most of my engines as I mostly just run on air for display.The power piston is a close fit on sterling engines, the displacer piston has a gap.
No you really want a lot closer than that, even with rings that is a lot more than I would allow. something like 0.001" or 0.02mm on that sort of diameter if you want to put a number on it but I just do it by feel. You also want a good finish on the bore (this one was not the best)Have a look at this video of the fit for the engineI just completed. The end of the cylinder is just being held on a flat surface, with the steam/air port uncovered the piston drops straight to the bottom. If I put my finger over the port it takes a long while to drop. No Piston ring and no oil to seal anything.http://www.youtube.com/watch?v=Vp2Vrq1Ziw4http://www.youtube.com/watch?v=jIhDdFKNSzA