Yes, rebuild that 904.
Sure a 727 is stronger but not necessarily the better option. As stated before, you'll have to sort out a torque converter, and on top of that you'll need to shorten your driveshaft.
A 904 with a good HP rebuild kit can handle a mild 360 easy.
Heck the guy who helped me rebuild my A999 is very confident that my trans can handle a 408 stroker. And he's been rebuilding these transmissions, as well as building ones for racing for over 30 years, I'm glad I got to pick his brain.