From what you're describing, I'd go with a mild cam on a 350. If you want to go further, maybe put forged internals in so you could add a turbocharger or supercharger down the line. I'd also recommend to rebuild your 4l60e to 4l65e spec or better bc 4l60e's aren't as bad as people make them out to be, but they don't like anything more than stock power from what I've read about.
383 would also be a great option as well. That would be my next choice.
Also, if you rebuild the transmission, add a transmission cooler. Preferably a GM branded cooler. I have a very bad taste in my mouth for aftermarket coolers bc the previous owner of my truck added one and it failed resulting in my transmission being wiped out.
If you go with a built 350 or 383, something else nice to add, but not as necessary would be an engine oil cooler. I was inspired by this thread on another truck forum posted back in 2010.
Ever since I have owned my 88, I have despised the engine oil filter. Not only is it small, but it's at a rediculous angle that makes installing and removing it somewhat messy. Anyone who has changed oil in a GMT400 truck will have noticed that it drains directly through the front u-joint. Since...
www.thetruckstop.us
Unfortunately, almost all the parts they use are discontinued now. I've searched the wreckers and have had no luck. Right now I'm hoping that I can use a 96-02 Chevrolet Express/GMC Savana 2500/3500 Oil Cooler and lines with a 2500/3500 oil filter adapter and filter. I already got the adapter from the wreckers off a 1997 Chevrolet C2500 and the cooler off Amazon. I also got a WIX 51060XP filter all ready to go so all I need to do is get the lines. I'll add part numbers later if you're interested.