The more I'm reading and learning on here (which is a lot) I'm getting the understanding that using 340/360 heads or any heads with 2.02/1.6 valves is too much for a 318.
I don't know who told you that, but i would suggest that they are mistaken.
I run 2.02/1.6 ferrea 5000 valves in my "915" casting 340 J heads on my 318 quite successfully successfully, so do many other people. (a 340 is only 7% more displacement than a 318 )
The main thing to be sure of is that you get adequate compression for your combination, through the use of aftermarket pistons and/or machining of the deck/heads.
