Looking for 360 advice on a budget.

I would agree with most of what's been posted above. Here's my thoughts-

Keep the 8.25" rear. Even with a well built 360 it'll be more than strong enough, just change the gears and get a posi, especially if you're not planning on racing it.

Use the money saved on the rear and buy some new pistons. This will cure your compression problem, and you won't have the hassle of milling the heads and trying to make your intake fit, or dealing with having milled heads at some point on a future rebuild. If new pistons aren't an option, you can also swap in smaller head gaskets. SCE makes gaskets all the way down to .021" compressed, that alone should bump your compression by 3 or 4 tenths of a point, which is assuming the factory gaskets are .039" compressed. They're probably thicker than that, so you might gain as much as a half a point just with that gasket.

As far as the cam goes, it seems like it would be ok with headers and a 4 barrel. You should go with a higher stall converter when you rebuild the transmission. Personally I like the Lunati Voodoo cams, but that's just me. By the specs it looks like the Hughes cam is pretty close to a Lunati 60403, which is a good street cam.

Good luck! :-D