this would be my plan of attack as well. on the heads just good valve job, mild work with the grinder.
go mellow with some pistons to get something in the 9.5 comp ratio so maybe KB167's?
keep it hydro on the cam and an RV style grind would give you maybe a semblance of fuel economy on the highway but with some grunt.
round it out with some headers in the search for some more useable low and midrange power.