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I'd disagree that a '78 Camaro is a waste of money; especially compared to a '98 or that era. Although the late 2nd gen Camaros aren't worth what a 1st gen, or early 2nd gen are, they are certainly beginning to go up in value very quickly in recent times. How much you invest in it is your decision, and that's rarely based on whether it's going to sell for what you put in. We love our cars, and most of us do this as a hobby, not an investment. Rare for anyone to build a hotrod, and get their money back.
I'd want to build the car so it would be fun, but not so radical that it can't continue to get decent mileage, and drive well. I'd also consider tossing the TH350 in favor of a OD automatic, as it will make the car even more enjoyable to drive on the open road.
I'd stick to a milder build in the 350-375hp range. Plenty of get up and go, but not crazy. When you go through the rear axle, I'd put a decent posi in, and use a gear ratio of around 3.56 to 3.73, so it will have good acceleration, but with the OD trans, still get good highway mileage.
 

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You don't need to go 6500 rpm or higher to be fast. Consider more than rpm when you want to go fast. HP, cubic inches, and torque should be your main factors. And if your engine builds those at under 6,000 rpm, then you'll be much quicker in 1/4 mile than most of the street cars around you.
I never take my 454 BBC over 6,000 rpm (intentionally!) and I'm pleased with how it holds it's own against cars that wind to 7,000 rpm easily.
 
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