Why are 318's low HP and torque?

Smaller cylinder bore makes less power, valve shrouding does not help with smaller bore either.

318 Cylinder heads have smaller valves and intake runners which is not conducive to making big power.

All the above with shorter stroke than a 360 and you have an engine that occupies the same amount of space externally, weighs virtually the same and makes less power. 318's were built as a base engine with economy in mind. They can be built to make good power but the same cam, intake and headers will make more power in the larger engines. Bigger engines are just bigger pumps.

Just like the slant six stuff, you can increase power dramatically with the right combination of parts but the same effort applied to the larger engine is gonna make bigger power and be more tractable.