"K" Members

I figured that since I'd be going to a V/8 why not a 360.
That was my thinking also.
But, if you keep the cylinder pressure up, you will have a preponderance of low-rpm/low-speed power. With a 360, in a streeter, is is easy to get way more power than the stock chassis can handle. The nice thing about that is that you can detune it compared to a 318/340, and let the long stroke make excellent fuel economy, and still have a heckuva fun street car. For a dual purpose street/hiway, the 360 is hard to beat.

Can a 904 transmission be used with a mild built 360
The small TorqueFlite, will be fine at least until you fix your traction issues. But the 7.25 will not take shock-loading, and will not survive one-wheel burnouts for long. If you put a SureGrip in it,with fresh oil, and not fat tires, it should last a couple of years at least

Car is rust free and has a/c but is a 6 cylinder car. Is doing a V/8 swap worth the money, effort? Asking price is 16k obo? I

Rust free is getting harder and harder to find, so that is worth something. Is it worth the asking price? Well only you can answer that. But, by the time you bring it on-line, you will have way more money in the project than you could ever hope to sell it for. So you will be more or less forced to keep it. And that means drive it, maintain it, and keep it from deteriorating; which usually points to a dedicated building. So it will probably be a life-long commitment.
By the 100,000 mile mark; everything will be tired, and some stuff will be worn out. And there may not be parts out there in 10/15/20 years. So for such a commitment, you gotta start stock-piling your own normal-wear parts, right from the beginning.
In the mean time, if somebody T-bones you in a front door, or heaven forbid you run it into a lamp-post, there you are, $30,000 plus a building and parts store, in the hole, and not much to show for it.......... except starting over........ and you are now several years older.
Is it worth a 16G buy-in?
Not to me.