My thoughts . . for what they are worth (I just opened the door here guys so come on in):
1. Mag case should be align bored and shuttle pined if you bump up the HP. The 2.7 displacement strained the 7r cases to the max.
2. Heat kills and = pulled head studs. HP = heat. 2.7s didn't break studs for the most part, they just pulled out of the case. Time Certs are a mandatory for the 2.7.
3. When you talk about hot roding a 2.7 and machine work I'll be willing to bet your wallet's hole will be 5-7k MINIMUM and you will still have a 2.7. Call Steve Timmons in Delaware and see what he has in the way of a 3.2. He rebuilds anything 911 and is top notch. Here is Steve's home page:
http://instant-g.com/Products/36Conversion/index.html
I would not suggust a 3.6 due to cost of conversion and you have not indicated a need for abserd power like some of our board members.
The 3.2 is probably the best engine for drivability, reliability, and cost to maintain of any engine that you could put in the '76.
4. What is your intended purpose or goal for the car. If you just want to drive it on the road, after throwing a couple cans of techron or Jetron in to see if something gets freed up, I would probably just repair the 2 cylinders that have failed and drive the car. Save your money for a more meaningful replacement for the 2.7 when the final failure comes.
Ok guys the flood gates are wide open now.