The value of some things done in modifying an engine are hard to measure (unless you have a dynamometer). IF you look up the bore of a y-block with the cylinder head in place the valves are significantly shrouded. Relieving the block (flathead Ford terminology) is an effort to improve volumetric efficiency not unlike porting cylinder heads.
Yes, you are modifying the combustion chamber shape. Yes, you will slightly increase the effective combustion chamber size, you will slightly decrease the compression ratio, and you will change the turbulence in the combustion chamber.
When I have done this, it has been on normally aspirating engines, not supercharged or turbocharged. I mention this because some feel that even cylinder head porting is of less value when the air fuel mixture is pushed into the combustion chamber rather than merely drawn in by atmospheric pressure and the 5th cycle of the 4 stroke engine.
Make sure that the depth of the material removal is less than the top ring groove of the pistons you will actually be using. Although time consuming, I have finished the material removal by using a hand file to ensure a uniform taper from the gasket ring to the top of the cylinder bore.
IF you look closely at the pictures of Ted Eaton's EMC entry in Y-Block magazine earlier this year, you'll notice that the deck of his engine had the same relieving that you are proposing to do.
I think that little things do make a difference in the building of an engine. I like the way AussieBill put it.
Regards,
NoShortcuts
a.k.a. Charlie Brown
near Syracuse, New York