I'd go for a 261, wish I had know about them when I was in high school. Instead I rebuilt a 235 for my 1 ton (while in high school) at the time I wanted lots more HP, but looking back the 235 was a great decision and I learned a lot.
Doing something reasonably stock with easy to get parts and most of the answers in the service manual is a good idea for a first project. Save the unusual or far from stock engine swap for your second or third project.
For a transmission either the 3 or 4 speed and faster rear axle gears. Neither have Over Drive, and the advantage to the 4 speed is a nice slow first gear and a floor shifter.
Or I'd seriously think about a T5 5 speed OD possibly with stock gears. You'll need to go to an open driveline though.
Grigg
