Keep the 904, it uses less power, weighs less, runs faster and can handle lots of power when built for it. And the driveshaft still fits! No hassles there! Huge homerun.
On the rear end, go with a Dana. The 8-1/4 can do for now. There highly underrated!
The engine as is, is to small to actually make a statement as in go fast. To much weight to move, to small of an engine. They can be made peppy! But that's about it.
If your interested in stroking the engine for cubes, a 4.00 arm is inexpensive and readily available. There are kits out there with more stroke but it will become very expensive so, I am opting in on a bang vs. buck spent and saving money. (As if I was doing this myself.)
In all honesty I would start with a cheap 360 block and go from there. Look for a late '80's, early 90's roller cam block.
For heads, budget wise again, there are a number of aluminum heads to consider. Edelbrock heads (for example) can be well ported and make power clearly into the 550+ range.
If your pockets are a bit deeper, I would look at the Victor heads and Crower rocker arms. Ether way, a solid roller would be the type of cam to use.
I'm not really a N02 fan but it does work and work well. It's like crack. Your always going to the dealer for more when you run out.
(I'd supercharge it)
And put your car on a diet!