I'd drop in a 350. With the tons of aftermarket parts out there, its literally a drop-in.
The 2.8 (in my opinion) is a fine engine. The bad crank issues were a rarity in very early production. They were not an issue at all by 1984. Nothing special about it, but its reliable and parts are dirt cheap. Other 60* V6 swaps are available (like the 3.1, 3.3, 3.4, 3.8, etc) but they have to be RWD sources. The 4.3L can drop in as well, but the crossmembers are different between the early and late S-trucks. The 4.3L is a small block V8 with two cylinders lopped off.
The 700r4 is pretty weak in factory form, but it is also only responsible for 130 hp and 175 tq. It survives fine in corvettes, and in fact a variation of the 700r4 is still used today in full size trucks with 300-hp V8s. It will run forever, or until the valves start sticking and you get really rock hard shifts. Then you'll need a new valve body. Since the 700r4 is the most commonly used tranny that GM ever made, junkyard parts are a dime a dozen.
The transfercase is big-boy stuff; NP203 IIRC. Same as is used in some Jeeps and FS trucks.
The S-chassis is a great setup. Not inspired or modern, but it uses many off-the-shelf GM parts sourced from other trucks and cars. It also has a full frame that is very sturdy.
I'm actually currently actively searching for a truck, and an early S-truck is on my list.