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As far as the L26 goes its a beauty of the L series. Change the head out for an early L24 and have L28 valves installed in the head with a port job and a cam. The engine will have a broad flat torque band that will blow L28's into the weeds. Rev like an L24 with the torque of an L28. Best of the worlds.
I would most likely keep the L26 in the car though because its original and due to the fact that 260Z's were only made 1 year they have turned into a bit of collectors item.
I would not toss an LS1 in it or for that fact any S30 as it has way to much torque for the chassis unless you cage the damn things. Oh and that car does not sound like a candidate for that kind of setup. It is a for an Original resto with a few performance mods like suspension and some internal engine stuff. Other than that keep it classic.
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