Chevy did not have a good differential for years. The reason is the load is carried through the axle to the bearings, resulting in axle fatigue and wear. They tend to get real noisy at times. If you're not making a daily driver, keeping the old axle should be fine.
Nothing wrong with the closed driveshaft, except for the oil drip at the tranny ball, and being a pain to disconnect from the tranny.
On the engine, the 230 is a better engine, but it won't look right if you're want an original look. I would continue the search for a 235 or 261.
