When is a 904 too small?

12.5 is really good considering a 2.92 rear end. What stall do you run? Is the rear a 7 1/4?
I ask because I have the 2.92 rear, and a 450 hp 340 sitting in the corner of the garage. The car has a 273 in it, which is stock, but pairs with the 2.92 fine. I am hesitant to put the 340 in it because it seems like such a mismatch.
But, sounds like you did it, and it works well..
I have a built 904 like yours too, sitting on the garage floor. It has a 4k stall and manual valve body. All that just seems like to much for a 2.92 to me, but maybe not? Yes, a 8 3/4 is on my list..

A 340 is just a big-bore 273......
What can make a 340 ugly is the cam and cylinder pressure.
The tendency for the majority of guys is to stuff a big cam into a 340 and rev it. But with 2.92s, 6000rpm makes a one gear run to 65 mph. To do that well, requires a 5600rpm cam which is about a [email protected], and that is gonna want a 10.4 Scr. So far so good. Except for one little detail, the bottom end is now as soft as a 318LA 2bbl.
But no problem for you, you have a 4000TC; no bottom end to worry about.
Taking off HARD from zero mph is the big deal.
Say your 273 maxes out at 180 ftlbs at 2000 stall, and has a 904, and that 2.92, and say 27" tall tires Ok this conspires to put
180x2.45x2.92x24/27=1145 ftlbs to the pavement....... and you are ok with that. Remember that number;1145 ftlbs.
Now,say at 4000rpm your 340 maxes out at 380 ftlbs, and yur gonna keep all the rest as it is. Ok then
380x2.45x2.92x24/27=2416................... that's over double 1145....... where's the problem?
A footpound is a footpound.
Or say you had a TC that dragged your 340s rpm down to 284 ftlbs, and you had 3.91s. Now
284x2.45x3.91x24/27=2418 ftlbs .
Or say the TC dragged the torque down to 258ftlbs and you had 4.30s, you guessed it
258x2.45x4.30x24/27=2416 ftlbs.
Now if you had left that same 2000TC in there and your monster 340 maxed out at the same 180 ftlbs, 180x2.45x2.92x24/27=1145 ftlbs to the pavement ; and then I can see that being somewhat disappointing..... because if it doesn't spin the tires, it's gonna be a bit of a wait until the engine gets up on the cam.
All of these apply at zero mph. How they blam thru the rpm band is a whole nuther story.

Sure it seems like a mismatch, and it is..... for drag-racing;
but you might have the street-combo of combos right there.... Well except for one thing; I can't say how a 4000TC is gonna like traffic. I've seen it on U-tube and it was kindof cool, but I bet it sure sucks gas.It reminded me a lot of my daughters CVT equipped Forrester.
Hope this helps