65 Barracuda... Got BAD News...

If it's a smoker, it's rebuild or replace time. As you suspect, a 318 has a little more up side in the future if you want to add horsepower. The difference in cost will be the cost of a rebuildable 318 (shouldn't be more than $200) and piston/ring costs which are higher in a 273 so you'll recoupe a little by doing the 318. All things being equal, the 273 will get a bit better gas mileage....maybe 1-2 MPG. The other nice thing about the 318 is it will have many more intake manifold options. The '64-5 273's have unique intakes and heads.