There were sleeve valve aircraft engines mass produced before and during the second WW. The liner reciprocated as a means of valving. They were air cooled!
It's all a compromise in manufacture and efficiency. Good sense would ascertain the need for a head gasket with some sort of protection to an eroding inner edge. Possibly a method to produce such a quality gasket was beyond their capabilities at the time? Would they admit such a deficiency in an already marketed engine? We are left to guess and try to make reason for their choice....
The cylinder liner is basically anchored at the top with a cast-in liner - that is if the keying method is satisfactory. The top is where the greatest heat is generated and also where the greater mass of the cylinder is and so will also shrink the most on cooling. This is the reason for the necessity of torque plates to achieve an accurately machined or measured bore in air cooled cylinders. The lower end is cooler and less dense so will compress greater when torqued than the top so the relaxed bore is larger at the bottom to allow for another of those compromises - the greater expanse at the top. (This cold upper tightness is a major reason for a period of warm-up of an air cooled engine before hard running to reducing the possibility of yanking a cold piston apart, or scoring a liner or piston.) A Harley cylinder is tapered when cold, the tight end being the top where the mass is, and the top grows with heat.
Water cooling would solve a multitude of problems but, I feel sure that something very desirable about these engines would be lost....they would not be a Harley Davidson engine any longer. The engine noise would be gone, no more valve train noise because the temperature would always be the same; where the thermostat says it should be, so the cylinder would always be the same - no growth. Fins would be added for aesthetics only since they wouldn't be required any longer....This 110 may be a lunk, but it has the best of it all - old and new. It leaks oil as Harley's always have, it's noisy as hell and burns lots of gasoline. What more do we want....?
BC