I think the 261 will be straining in overdrive with the 3.38 rear end. As a teenager I had a 52 Chevy with a hopped up 261, a Packard overdrive transmission and a 3.55 pontiac rear end. It would cruise Ok in overdrive on a level but would bogg-down on hills. Now (50 years later) I have 40 Chevy with a mild 302 GMC and a T5 overdrive running a 4.11 rear end. It runs fine -- great pickup and it will cruise all day at 70 without strain.