I have a '59 Viking 40 with a 292 and a '69 C50 with a 350. The 350 has a lot more power. I would choose a 350 over the 292 if I were swapping engines. A 350 will be easier to find parts for if needed. It's not going to be the easiest swap either way. If you want the simplest solution maybe rebuilding the 261 and changing out the gearing like Jerry suggested would be the way to go.
If you are up to the challenge, I would go 350 or 400 as Evan had mentioned.
John
