Why are 318's low HP and torque?

Bore size IMO doesn't come that much into play. The LS1 has a smaller bore than the 318 and the LS1 can make plenty of power (but LS1 magic is in the heads)...
LS1=3.89
318=3.91

Small (under carbed with a 2bbl), log exhaust manifolds with single exhaust, tiny 1.78/1.58 valves, pistons way below the deck= low compression, and if I can recall, the factory cam is under .400 lift.

Correct these problems (mainly compression) and the 318 will run like a bat outta he//....