Swapping out a 350 to a 5.3L is going to leave you disappointed in the performance. If you are going to go to all the trouble of swapping in an electronically controlled engine swap in the 5.7L or 6.0L or 6.2L engine.
The issues of getting the electronics to work is going to be the same amount of work so you may as well get as much displacement as you can get.
I would also try and get a 4L80 transmission at the same time. The Turbo 400 or 700R4 are not bad transmissions but getting a transmission that locks up the convertor in more than the top gear is a good thing. You may also have an issue of getting a mechanical transmission to work with an all electronic engine.
Also, in a bus of your size the 4L80 is much better suited than the 4L60. They are basically the same transmission but the 4L80 is much heavier duty. The 4L60 is used in C/K1500's behind all of the small blocks and the 4L80 is used behind both the small block and big block in C/K2500's, C/K3500's, and C/K4500's.
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