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361 Ford with Spicer 5 speed trans on 1964 Bluebird 33' long. Good strong drivetrain? - pros?, cons?... I will want to get over many mountains and still get as much speed as possible in highway settings. Is this setup a funtional path in that direction?
Also, how best to insulate a new floor I would need to lay in above bus - I was thinking a 1'' thick sheet of insulating styrofoam between a 3/4 sheet of ply inside and a sheet of 1/2'' below.
Thinking about floor insulation myself. I need the present headroom so for something thin I'm thinking about covering the floor with glued down 100% wool army blankets like we did in Vietnam. With all holes in the floor plugged up it might do the job and it can only help. Spraying the underneath of the bus body with something like sound proofing or brushing on truck bed liner would be a big plus as well. Wool dries quickly if wetted and dries from the inside-out also so you could cover it over with a thin layer of vinyl linoleum to make it look better.
The 361 is way underpowered for highway cruising in that size of a bus unless you don't mind living in the slow lane. Figure on 55 MPH as tops on the flat and dropping gears on any hill. On the other hand, it is about as rock solid a combination as you can find.
Updating to a 429 would be a good choice if you want to stay with a gas engine. Don't go to a 460, it isn't the same family of engines and the bellhousing most likely won't fit. Don't go to a 534 unless you own stock in Chevron or Texaco--the 534 is known for getting.5-1 MPG.
Diesel engines were not offered from the factory at the time your bus was built. Repowering to any diesel engine will require a lot of hot wrenching and isn't worth the effort. Good running diesel buses are available for less $$$ than what you would have to pay for an engine by itself.
As for insulation, it sounds as if you are going in the right direction already.
As far as the floor; use a framework of 2x2, but don't screw it down tight! Lay a bead of silicon between the framework and the bus floor then pull it down to 1/8". I used 1 1/2" of styrofoam with 7/16 OSB. This killed a lot of noise.
If you are looking for freeways speeds; think about an auxillary overdrive unit. That 361 will pull mountains but slowly. As with all skoolies; if you want to get there sooner; leave early.