.40 over 170 rebuild

To adiffrentcity. I'm sorry, but I disagree with most of what you said.
First of the most "bang for the buck" on a slant six is to increase the compression ratio. Within limits there is no down side. It will increase torque, horse power, and economy.

68val_100
Most slants sixes from the factory have less then 8-1 CR. For a street driver I would try for between 9.0 and 9.5 to 1 CR. A 170 engine is different then a 225. The 170 is a zero deck motor (piston comes up to the top of the block). In the real world the piston is usually about .015 down from the deck (a 225 the piston is about .170 to .180 down), so you can't mill much from the deck. If the deck is flat just leave it alone. Mill the head to get the combustion chamber to the size required for the CR you want. Measure to find what you need. A slant six head can be milled as much as .100-.125. This can give over 10-1 (too high for a daily driver).
Offset grinding to crank is too much money for the minimal gains, and you need to be carefull you don't raise the piston out the top of the block.

I would shoot for about 9-1 CR, a mild cam. free flowing exhaust (dutra duals are good, but I would stay with a single pipe). Offie intake, with a 500 Edlebrock (that carb is a little large but it should work OK). Electronic distributor (recurved) and a HEI icnition system.

I have a 64 Valiant street car with a 9.5 CR 170, the mild MP cam, It is .060 over (bored and honed with a block plate (not necessary in your case), Balanced (again not necessary in your case). Stock intake/exhaust manifold, stock 1 bbl carb (I plan on trying a 4 bbl manifold and a Q-jet carb, in the future), free flowing single exhaust. Ign as described above. Car gets around 26-27 mpg, and is very peppy. 3 sp on the columm, and 3.23 rear.