I know that there is a lot of hp/tq hidden in these underrated engines. I have a budget of $1500 for parts, besides swapping in the 360 heads, what do you experts suggest?

 

A hotter cam and better exhaust.

 

There are differences between the 318 and 360s like the 318 will rev higher due to shorter stroke and can make more Hp. Where as the 360 makes more Tq due to the shorter stroke. A lot of the parts are interchangeable so I would suggest a nice cam setup, intake and exhaust for starters.