Hello,
just to add my 2p's worth here, im running a 109" SIII with a tuned 3.5 v8 on su carbs and the standard gearbox, there is no way that i am Mechanicaly sympathic with it, and the gearbox is still doing fine, i get very good mpg 20+ on a run and i have no problem at all with water, i regually tow a tripple axel ifor trailer with allsorts on it, I say go for the V8 and you will not regret it, the fantastic noise and the power.
but as regards the problem fitting the other motor, as before clutch alignment, check check and double check
and one last thing if you do go for the V8 kit, get the flywheel aswell, they have to be re drilled for the clutch and the spigot bearing is a bigger one than the standard V8, there was a chap selling the spigots on ebay the other week.
thanks
Matt