If you are age 59.5 or older when the funds are withdrawn there is no early withdrawal penalty.  The taxable amount of the retirement fund withdrawal is entered on your tax return as ordinary income and taxed at your current tax rate.

The 20% is probably withholding like withholding on your paychecks. You get credit for it. That shows up on your tax return on line 64 with your other withholding and is subtracted from your tax liability.

Oral surgery is a deductible medical expense unless it is cosmetic surgery.  

There is a penalty exemption for medical expenses but it only applies to expenses that are more than 7.5% of your adjusted gross income and only applies to the share of the expense that is more than the 7.5% floor.