I'm not necessarily a big block Ford guru, but I will try to help. I've built a couple of them in the past and as you have surmised, the heads are the problem. The early heads ('68-'71) have small chambers and do not have hardened valve seats to run on today's fuels. The small chambers present a problem with getting pistons with enough dish to bring the static compression ratio in line for pump gas with an iron head. Even if you can, you're still faced with installing hard seats and upgrading the valve job. And you still have poor flow characteristics compared to other heads that are available today. So, even more money must be spent porting them if you are looking for some serious street horsepower.
Scott Johnston at Reincarnation is probably the primo Lima motor head porter, but a good-flowing set of his heads can get pricey in a hurry, so unless you just have to run iron heads for a class or something, I don't think this makes much sense. I may be wrong though, I've been wrong before. Decide for yourself....
http://www.reincarnation-automotive.com/products_index.html
I always enjoy putting combinations together and flogging them on the DynoSim, so here would be perhaps a good street motor that I might assemble is I were so inclined. You won't need a stroker kit, just a 0.030" cleanup re-bore and stock 3.850" crank will do the job
The early blocks were, I think, 10.300" block deck height, with the later blocks ('72-up) being 10.322". Have your machinist to check the block to see what the stock block deck height is on your block. The stack of parts I'm going to use equals 10.302", so anywhere within a few thousandths of that will work. Use an Edelbrock #7314 head gasket that compresses to 0.048". You have to be careful with aluminum heads and use the gasket recommended by the head manufacturer. Gaskets made for use with iron heads could "Brinell" the heads. Look it up if you aren't familiar with this term.
I would use Edelbrock #60669 heads, 95cc chambers, 2.19" intakes, 1.76" exhausts with 292cc intake runners. There are bigger and better heads out there, but these will work great on a street motor. Use these pistons with them for a static compression ratio of 9.9:1.....
http://kb-silvolite.com/performance.php?action=comp
Routine stuff otherwise, RPM or Stealth intake, 850 carb, 1.875" long tube headers, ARP rod bolts in the stock, resized rods or aftermarket rods for a little more peace of mind. I'm going to use a hydraulic flat tappet cam on this build, so you want to observe all the precautions of using a flat tappet cam. Oil formulations have changed and extreme pressure lubricants that were originally in oils only a few years ago have been pretty much removed.
We'll use this cam, it delivers the goods at well over 500/500...Use Comp #924 or equivalent springs....coordinate with Edelbrock before you order the heads....If using a standard transmission, great. If using an automatic, bolt a 3000 stall converter to the flexplate.....
http://www.compcams.com/Cam_Specs/CamDetails.aspx?csid=990&sb=0
RPM HP TQ
2000 172 451
2500 218 458
3000 279 488
3500 356 535
4000 427 560
4500 492 574
5000 536 563
5500 555 530
6000 556 487
6500 505 408
I think I'd put a rev limiter of 5500-5800 on the motor and gear accordingly.
Static compression ratio 9.90:1
Dynamic compression ratio 8.00:1
Volumetric efficiency 100.1% @5000
BMEP 185.6 @4500
Squish with 10.302" block deck height (zero deck) 0.048"