33x12.5s is really plenty big. A Skyjacker 2" full spring lift will be more than enough. The dana 60 upgrade for the rear is good idea as the 9 1/4 is more than likely rusted out under the shock plates and you can twist these axle tubes off like a beer can when they get rusted.
The structural body work you are going to have to do will be intense. If the rockers are as bad as you say, the body might start to fold when you jack it off the frame. There is a rear panel that ties the bedsides together. I had to rebuild mine as they are no longer availible and it was some complex work. How good are you at bodywork?
There's not a whole lot you can do about the brakes other than adding new new front rotors, good pads from "Hawk", add rear disks to the Dana 60 and some braided steel brake lines to replace the rubber stuff.
A 360 built right will give you plenty of torque, espacially with a stroker kit and mild ported magnum heads. You would still have the option of putting EFI on it from a later 360 with a upgraded computer too. Granted a 440 would be better but you'll need to check your emissions laws there. If they don't check you, go for it. Otherwise they may fail you for putting a early engine in a later body and an EFI conversion would be really pricey.