Last time I drove something I owned through Chicago it had only 60 cubic inches. It did fine, but it only had two wheels and maybe 100 horsepower.
The 261 is probably the easiest swap and no different than going to the 235. The next step up would be to go GMC which adds modifying the front engine mount, and can give you 270 or 302 cubes stock.
Really though the 235 will do the job. More important is that it be reliable so you don't get stuck sitting on the freeway with traffic rushing past.
Most important is the brakes and steering. People driving modern cars with ABS brake systems have no idea how much room it takes to stop an old truck with drum brakes. If it were mine I'd worry about the brakes before the motor if it was going to carry my family.
Actually, my Suburban, a '55 1st GMC, has carried my family more than once. I updated the brakes five years ago and haven't done more than change the oil in the old motor.
