If you're going rebuild, I would recommend 360 no question. 318s aren't cheaper to build because of the lower cubic inches. Any dollar you spend machining a 318 is the same price as a 360.
I've got a 72 Satellite (sedan-don't get excited) and I've been dinking around with the stock 318 on my chassis dyno. In stock 100,000 mile form (though it leaks down good and has very good compression - for a 318) it made the almighty 130 rwhp at 3400 rpm. Torque was surprising at 200 ft lbs (but still mediocre for a V8). I installed a carefully chosen Summit cam (retain dynamic compression-be compatible with nitrous, sound cool) 4 bbl intake, 570 cfm carb, Hooker Super Comp headers and 2.5 inch dual exhaust. It *does* sound cool (people ask if its a 440-LOL) makes about 200 rwhp. Makes almost 300 rwhp on a hundred shot of nitrous. It is all done by 5000 RPM, with peak power coming in at 4950. Power is noticeably improved over stock, and I'm having great fun with it, but its a dog. It will hardly do a burnout without nitrous assistance.
The reason I did this was I built it for the Roadkill $3,000 hooptie challenge and took it on Drag Week. It did go 12.70 on a 150 shot, but I also lost a ujoint and broke the trans case, bent the driveshaft and hurt the rear end. Got it back together but missed the 3K hooptie race. :-(
Compare that with the junkyard shortblock 5.9 Magnum I built with EQ heads. I had 2500 in the motor from carb to pan, it made 335 rwhp on motor, and in a pretty decently figured out car it went 11.70s (on motor). At equal weight to the Satellite, I would expect it to have gone 11.90s, maybe 80s.
Obviously, ALL the power comes from cylinder heads and 318s have terrible heads. If I put 340/360 heads on it (and a superior 340/360 intake) the 318 would make more power than it does, but its still not going to make the same power or torque as a 360.