I have a built 727 behind my custom 318 1970 Duster. But mine's pushing about 430-440 HP though, but if you're going for a more mild build, then a buffed out 904 will serve you just fine.
A built 904 would be fine for 450 hp, actually. They're used by a lot of drag racers running more horsepower than that because of the lower resistance of the 904 vs the 727.
Even with stock internals a 904 should have no issues with most 318's. For a driver I wouldn't mess with a full manual valve body, not really necessary and not exactly daily driver friendly. I'd throw in a good set of bands, a transgo TF2 shift kit, a slightly deeper pan for better cooling (and a drain plug!!!) and maybe a 5.0 kickdown lever. If you really want to make horsepower, upgrade the sprag and some of the other internals. Make sure to match the convertor to your cam.
As far as gears, it does depend on your rear tire height quite a bit. If you're going to be spending a lot of time of the freeway, I'd probably look at 3.23's or 3.55's, maybe 3.73 depending on the rear tire and how far you're driving on the freeway. I run 3.23's in my Challenger, which has a 318/904 and a 26" tall rear tire. No problems at all on the freeway, I can run it for hours at 75 mph. I don't think I'd go higher than 3.55's for what I do with mine though. Also keep in mind it will make a difference in your gas mileage too, my car had 2.76's in it from the factory :D, and the switch up to 3.23's was definitely noticeable, I lost a couple mpg's. But it was also a pretty significant change on acceleration too.
