Given how original that truck is I would be very hesitant to modify it. If you do, save all the original equipment and don't drill any holes in dashboard, fenders,etc. If you can find one, a 54 261 will be indistinguishable from the factory 235 unless someone runs a numbers check. A 261 was the base engine for 2-tons until '63 when they went to the 292. Anyhow, a 261 with the 848 head will get you 9:1 compression and exceed power rating of the lower compression stock head. It will get you down the road in fine style. They were rated at 150 hp at 4,000 RPM. I don't remember the torque figure but it was something about 220 ft. lbs. A 261 has significantly more snort than a 235. I made the swap 2 years ago. It pulls 9,000 lbs at freeway speeds running about 2600RPM in my overdrive gear (4.57 plus 17%).
I have 9 usable road gears and you would have 7 with a 2-speed axle. That said, there are straight 5-apeeds around with the right bolt pattern. Five speed overdrive Spicer units are rare and the Clark ones are all but impossible to get parts for, I'm told. You'd have to do some bell housing modifications to use the modern NV 5-speed OD ones found in Dodges, which have the best ratios. I believe these trucks came with either 8.25 x 20 or optional 9.00 x 20 tires. The 22.5 wheels were for tubeless tires and came later. If it doesn't have Firestone wheels you could put 10.00 x20 rubber on it and go a little faster. If it does have Firestone wheels start looking for replacements.
Bear in mind that these trucks were titled using the engine number (at least in Washington State) and Chevrolet did not stamp the frame whereas GMC did. I know this because I went through it with our state patrol/DMV. I ultimately was able to use the number on the plate riveted to the door post. But if I ever change cabs....
