I'd go with option #3. I ran the basic 350/265hp Goodwrench engine in a 69 C10 for several years, and it worked great with an Edelbrock #1406 600 cfm carb and dual exhausts. It made good torque at low-mid RPM and got decent fuel mileage. I also put them in a friends' vehicles -- a 55 Chevy car and a 51 Chevy pickup, both with 600 CFM vacuum secondary Holley carbs and headers. Yes, the heads and cam are anything but performance parts, but the engine is certainly not a dog, especially if used to replace a tired, stock 305.
That was back when you could buy the engine for $1200-$1500, but the price has gone way up since then. Today I might go with GM #19420873, a 330hp 350 with more compression and better heads. Or maybe an entry level 350 from Blueprint or ATK.
As for a used L31 Vortec, odds are the heads will have hairline cracks. Several years I bought a used L31 engine, and it turned out both heads had minor cracks. I ended up buying new GM Vortec 062 heads, a balanced rotating assembly, GMPP RamJet roller cam, and on and on. Turns out I spent almost as much as the 330hp 350 crate motor would have cost!
On that $100 #880 block, do what was suggested above. Then, if it has a standard bore, I'd jump on it. If over-bored, I'd want to mic the bores to make sure they don't need to go out to anything more than +.040". Keep in mind that the block may also need to be decked and line honed, depending on its history.
And if you don't have the budget for a roller cam setup, there's nothing wrong with a flat tappet cam if it's properly broken in using something like Driven BR30 break-in oil. None of the engines I mentioned above, along with others that I've built, have had valvetrain issues.