Don't worry about it. It's nothing. I've seen McGyver fix bigger holes than that with bubble gum.
Seriously though, a 1/4" hole? WOW! How did that happen? What are you running nitrous in there? LOL
If engine is new and it's a manufacturing defect get the engine replaced under warranty. If used you will need a new cylinder like metalliatic said. BUT, remember though that the hole might be just the tip of the iceberg. If you blew a hole that big in the cylinder a new cylinder might be the least of your worries. Maybe you over-revved it and your connecting rod broke and poked that hole. In that case add the con rod to your list and possibly a new piston too if it got damaged in the commotion. There might also be some crank damage and even a cracked crankcase from the force of the impact. If it needs all or even some of those in addition to the cylinder itself you're probably better off ($$$ ahead) buying another engine.
However you did say that you can feel air coming in and out of the cylinder when you try to start your bike right? In that case the piston/rod assembly might be still in one piece. But without disassembling the engine and looking at all the parts though it's hard to tell.
