Have you actually tried what you say can not work? I have run a 273 with 72 340 J heads. Best it ever ran, and that is with a 3.665 bore and 67 cu in smaller. No valve notches in the block. No port velocity problems. Not sluggish. Not torque limited. What compression loss? 675 heads are about 68 cc per chamber and a .020 milled J head is about 69 cc, at .040 you are about 65 cc. Bore is the smallest adder there is. I used to put 360 heads on 318's all the time. Never a complaint, never a dog. Do you know how to tune an engine and set up a transmission? I would never run a stock 360 cam in anything. Would a low compression 318 beat a 10.5:1 340 with X heads, no, but it will beat the snot out of a 318 2 barrel.
