stage one of 3.7 dissmantle

[RidgeRunner]

Aussie, Your going about a mile a minute. (That is 60 MPH here in the states.) I ain't saying it won't work but 10.5 to 1 compression is kinda high for 87 octane and the motor you are dealing with IMO. I know manufacturers use 10.5 to 1 in modern autos all the time but the engines have computer controlled fuel injection, timing, and various other sensors that sense spark knock, air and water temp as well as air flow, O2, MAP and even barometric pressure. So these engines continuously adjust for the proper air/fuel ratio and timing based on load and the environment. You will have to play with the distributor and settle for less total timing to make it work.
What kind of petrol do you have access to down there?
Solid lifters, as you know require adjustment and often. Hydraulic lifters are adjusted once and your done til' its time to rebuild the motor or you bend a pushrod.
I am guessing the valve stems were wore from lack of lubrication. Did the motor have good oil pressure? Was it full of sludge? You are going to grind the cam? You have that kind of machinist background and the equipment to make it happen? Grinding on the exhaust side of the heads helps the motor to flow more exhaust but it can also affect your low end torque. Grinding in the right places on the intake side with a flow bench yields the most increase in flow and is well worth the effort if you are going racing.
You need to post some pictures. This sounds interesting.
Free Beer, I am all in...