Help with building a bit more power in to the 318

Firstly, sounds like you have either a head gasket problem, or more likely a pinhole in the bore. This can be fixed by sleeving the bore/s. I don't think you will get 400HP out of a 318 just by putting in a cam and port matching the heads, you'll need to spend some $$. The new aluminium heads are very well priced now, compared to reworking the old cast iron heads with all new valves, springs and heavy port work. For the bucks, they are the best dollar performance value bolt on. And you can still do more port work to the aluminium as well. Plus you would have to be going with a big cam, a roller hydraulic or solid cam, single plane inlet such as a Victor 340, forged pistons, balanced and blueprinted etc. You would be more reasonable to expect 300-320 tops for what you want to do and spend. AND are you sure you want to use a stock 904? They are a good strong box,but nothing liek a 727...A few heavy right foots and it will not like it.