The 261 has beefier rods and thicker wrist pins (rods and pistons will not interchange with 235), siamesed cylinders (due to the larger bore), extra water jacket holes between the block and head, a somewhat more aggressive camshaft, and the '58- ups have built in full flow oil through the filter ports (which are 1/2" NPT). In addition some of them have a bypass thermostat, which is interchangeable with the 235 thermostat, except you may want to drill a hole in the thermostat to let steam and air out of the head on warmup. 261's are sensitive to steam pockets in the head because of the siamesed cylinders and require extra measures to eliminate them: the extra holes in the block, and a bypass thermostat on heavier duty applications.
The head is similar to the 235, but the 848 head has slighly smaller combustion chambers for a few extra compression points. The 261's came with Stellite valves in all years, but I'm not sure if the 235 did or not. The ports are exactly the same.
Distributors, water pumps, fuel pumps, intake and exhaust manifolds, and valve covers all interchange, as well as crankshafts. The cam bearings are the same too. The stock carburator is a Rochester B with larger power piston passages and #57 or #58 main jets.
I got my 261 out of a '62 suburban. It came with an 11" clutch and a bypass thermostat. It runs great although it needs new valve seals. It has been running cleaner since I started using Delo 400 oil in it.
