which heads on a 318

As guys have suggested if you want to keep the HP in the 300-325 range your best bet is a set of 302 heads. I would go for the 1.88 & 1.60 valves and have a good valve job and bowl cut/blend done. Gives best compression bump and flow for the $ spent. Match what you stated to a 340ish cam and 3.23 - 3.55 gears.

Magnum heads would be second choice. Higher compression + larger valves and flow from the factory. Cost is the issue, after you purchase these heads you will also need lifters (AMC) and pushrods for through the pushrod oiling of the valve gear, Magnum valve covers, Magnum valve gear, Magnum head bolts and a Magnum intake (Performer/Performer RPM). Starts to add up.

340/360 heads would be my choice if you wanted more power than your stated goal. The problem with these heads is the combustion chamber volume, they are all large: +/- 74ish cc. To really take advantage of these heads on a 318 you need pistons to raise the compression to an appropriate level to support HP levels in the 350 plus range. They would need quite a bit of milling and that causes other issues that have to be addressed.

I may be wrong but I don't think stock 318 heads will support your HP goal without lots of work.

The only draw back to 318's is torque. This is why most would steer you towards a 340/360. More cubic inches = more torque. To make HP you need air flow and an appropriate level of compression. The more HP you want out of the 'teen the more you need to increase the rpm to get the flow volume & velocity up. At low rpm power dies because of the big intake track volume but slow velocity. Think sewer pipe vs garden hose. To keep the engine in a happy rpm range and driveable on the street you have to increase the converter stall, rear end gearing, exhaust system, ect. You get 400 HP braggin rites but your stuck with a 3000 stall converter and 4.10 gears. Your "street rod" just became a "track rod".

The key to a powerful 318 is in the "packaging". The whole car has to work together in harmony. Here's my combination, it's snappy at low rpm, cruises around 3000 rpm at freeway speeds and is just fun to drive everywhere: '65 Cuda, '89 318 police motor (360 heads but with pistons for increased compression), 650 Holley, LD 340 intake, spitfire headers into 3" single exhaust, electronic distributor and orange box, 999 trans (904 with additional clutches and 2.76 low gear set), 2300 stall converter, 3.55 rear gear, 60 series 15" tires. Its all balanced and works together.