Hears a great build thread on swapping 4wd components to a 2wd frame.
http://67-72chevytrucks.com/vboard/s...d.php?t=626263
That's the route I would go. Grab the drivetrain out of the K30, springs xmembers and send it to the scrap yard. Run the TH350, NP203 with the TBI 5.7 until you finish the diesel swap.
If you are having machine work done you will be spending some coin. Lower compression pistons will allow more boost and the previously mentioned mechanical pump is a big upgrade in terms of reliability over the stanadyne IP.
You will need a vss at the t-case output to run a 4L80E. Either an NP241 with passenger side drop (90-91 suburban 2500 I believe) or the rare 91 V3500 NP205 are your options for stock pieces. If I recall correctly someone is making an output housing with VSS mount for older NP205's. That might be the ticket.
Good luck. Not a small project but the finished product would be cool with a mechanical injection 6.5, 4L80E, clean body and frame 4x4.