if you only plan on running 1/8mi then i would say that you need to invest in a shorter set of gears, say 4.88:1. you wont want to go on the highway with it. Your trap speed wont change to much but i'd be willing to bet that you will pick up around 0.50 in the 1/8.
next i would get rid of the 305 heads. the only reason the original builder put them on there is becuase they were cheap and would raise the compression ratio a good bit. i would look through classifids and ebay for a used set of 64cc combustion chamber aftermarket heads, as long as they have a good hard deck you can easily have them milled .030" which will take about 4-5cc's out giving you the compression you have now. with a .030" mill everything still lines up fine, but most times you can't go much over that without having to go into angle milling and having the intake milled. if you go this route i would suggest looking into getting a cam with more duration as well, as the cam you are running now was not meant for the higher compression that you are running with the 305 heads.