Mike,
You need to lap both surfaces, not simply sand them or polish them up. (You may know this, but it was not clear from your post.) To get them truly flat to an acceptable number you will need a very flat plate. A granite surface plate is ideal. A float glass plate is probably ok. Then clean it carefully and tape down a new sheet of silicon carbide wet or dry paper. You'd like to get down to a 16 microinch finish if you can.* It's not hard if you have the right equipment. For technique, don't lap back and forth, you will round off the parts (think rocking chair runners). Lap in oscillating circles. Some machinists will tell you to lap in figure eights, but depending on the part that can lead to more issues. (Like a crankcase. Help yourself by holding it as close to the surface being lapped as you can to help eliminate rocking the part.) Use a light oil or kerosene as you lap and keep the paper clean. You may have to start with something as coarse as 400 grit, but you will need to get down much finer to be sure it won't leak. I'd guessitimate at least 1200 grit. It won't take long even if you are starting with a very non-flat part if you go thru progressive grit sizes.
If you have the granite surface plate, you can wring the part on the surface after you have lapped it and it will polish the metal everywhere it touches. That will show you the low spots--they are not polished. Depending on how out-of-flat each piece is you may have to keep backing up in grit size until you are in contact everywhere.
Don't assume that the gasket is constant thickness, either. Not sure, but would expect this one is metal, and should be dead soft aluminum (1100 alloy). If it has a rough edge from die stamping, that can cause the problem. I have made head gaskets using soda cans. This is the right kind of aluminum. It has to be unalloyed and dead soft for them to back-extrude the can from a slug of it. (And I'll neglect talking about work-hardening because this is no longer a "technical forum." Sorry, that just slipped out....)
Remember that each screw only supplies so much compressive force to the joint. While it seems like a lot, it won't be enough if you have to deform the two metal pieces to seat and eliminate the leaks. And compressing a solid metal gasket will take a lot of force. So everything has to fit right. Trying to stop a leak with parts that aren't really flat or a gasket with issues can lead to too much torque and stripped bolts. If you have a small calibrated torque driver that can be useful to know when to stop.
K&B had a successful history of producing parts that sealed just fine after precision machining. They did have trouble with the Sportsters for some reason. The early Sportsters had an o-ring seal (with different machined parts.) That's just not a great idea due to the temperature. About the only seal that I would think would work there would be Viton due to its high temperature capability, but they probably didn't specify that material.
Hope this helps,
Dave
*--I'm assuming that neither of these parts have a "ribbed" interface. That was often done to reduce the compressive load required to deform the metal gasket. So, for example, an older K&B head groove would be flat and very fine finish. The gasket would be aluminum, and machined not stamped (or at least they did not have stamping burrs.) But the top of the liner (the lip) was machined such that it had circular ribs that went all the way around. If you parts have this, do not lap them off!