The main difference is nearly 30 cubic inches, but the 261 also has slightly heavier duty connecting rods, and more torque than the 235 due to the extra displacement. It makes a better candidate for a rebuild, as "there's no replacement for displacement". There's nothing wrong with a well-built 235, but the 261 is a pretty scarce engine, and has a better resale value, even if it needs a rebuild. I'd try to make a deal on both engines, if possible.
Jerry
