You want to keep the 3.42 gears and you dont want to lighten it from the almost 4000lbs, but you want to run 7s?
The fastest way to do that is with a relatively mild 455 Pontiac. Seriously. A small chevy isnt going to do it, there just isnt enough torque there. Maybe with a huge shot of nitrous and lots of stall, but it will be an overheating pig on the street. The only small chevy that would do it is one of the LS engines, the gen 1 isnt going to make it happen on your budget.
A 454 built right would do it, but it needs to be cammed for idle to 6500 with an emphasis on the low and midrange. You have lots more weight with the BBC, so you need to make more power to run the same time.
Gut the car, lighten the hell out of it, get it down to 3100 to 3300 and then you will have a much easier time getting into the 7s.