Power pully woes..
I'd oval it out. I've done that before and it works fine. 2 minutes with a die grinder and your done.
As mentioned you never want to put a 318 damper on a 360 unless the 360 has been internally balanced. If you look close at a 318 damper you'll see it's perfectly round with no notching or added weights. Now look at a 360 balancer and you'll see it either has an add on weight or has some of the metal notched out (looks like they did it with a router). That's half of what balances the 360. The other half that externally balances it is the weight added on the converter