318 build up suggestions

Cam in your original setup is too small IMO. I am going to build a similar setup using my XE284H. I say at least go with a XE274H w/ 1.6 rocker arms if your heads can handle it. Remeber you are going to need quite a bit of flow from the smaller displacement of the 318 to keep the velocity up in the big intake runners of that manifold.
I am going to go with forged pistons, IC844 which is the forged version of the KB167, maybe I will never need them but I would rather spend the extra money now. I am sure the KBs are very strong though.
As far as rods go I think a good OE replacement would be a good choice as mentioned, unless it is more cost effective to just reuse the orginals, I think they should be plenty strong, remember that the rod to stroke ratio of this engine is very high so the rods take alittle less abuse.