One reply is confusing.... are you OK with waiting 20 or 30 or 40 weeks and saving up the $$, or not? If you don't want to wait, then the immediate budget that you have to spend is the question. The answers to recommended parts depends a lot on what you have to spend. Putting in better pistons with higher CR would be a good first step for the 318 (it has a low CR from the factory) but if you don't have the $$, for just racing and hard hot-rodding, you can skip that and save some dough. You can put the $$$ into the right torque converter to work with a hotter cam instead. Then comes the question of heads....
It will be fine to build the 318 that you have now; the question will be if you be happy with that or want more? Of course you can always build the 318 and sell it later and build something bigger. I can recall that decision point a few decades back: build up the 302 I had, or get and build a 351C? I jumped ahead to the 351C and was sure happy I did.
You can make the car a lot faster with a stronger motor and it will last until the 7.25" rear axle fails. It almost sounds like you are heading down that road anyway so I'd go for it and enjoy; you can always replace the axle when it goes out.
Is the 400 in known good running condition? What fit problems do you anticipate? This seems like a good option to me.