7.25 to 8.25 swap? /6 to 318 swap?

So if;
(1) I just go get the 8.25 and steal me a limited slip and disc setup, would that improve anything behind a slant?

Besides not worrying about breaking the thing not much (also wayyyyyyyyy easier to find parts for). The 8.25 housing you need/want comes from an A Body and nothing else. The disc brake and limited slip and gears can come from the jeep. The disc are a hell of a lot easier to change pads vs shoes and way easier to check for abnormal wear. Also disc brakes cool down a lot faster than drums which means you can stand on the brakes longer/harder but you know that already. Basically a 4 wheel disc brake setup is better than a disc/drum or 4 wheel drum brakes (I assumed you had front disc already and if not a front disc setup is a hell of an improvement over front drums regardless of what engine you are using). Just remember that there are lots of a-holes on the road so being able to stop quickly and safely is sooooo much more than power. But to answer your question, you won't see much of an improvement with slant but start adding more power and you get the idea.

(2) If I do the above AND put this 318 in front of the 904, what would that do for me?

The 904 uses far less power to operate than a 727. Just get a good rebuild on the 904 and you're good to go. If I'm not mistaken the 904 takes about 15 Hp to power were as a 727 takes about 40HP to power it (my numbers may be off a bit but you get the idea) with a small hp motor any savings you can get is the way to go because the more you save from drivetrain loss the more you can put to the ground. That said if just swap the stock pistons to a flat top version in a 318, watch that motor wake the heck up! A good cam wouldn't hard as well as a 4 bbl intake (a performer from Edelbrock is and excellent upgrade and can be had for just a few bucks).

(3) Would I have to mod the driveshaft for either scenario?[/quote]
Just by installing the 8.25 rear, you'll need to have the driveshaft shortened. Not a lot but it will need shorting (even more so if you use the 727).