Be aware that B-bodies of that era sometimes came with the 7.5" axle. It won't really matter with the 140hp and 225tq from the 305, but the axle bearings will not enjoy 500 lbs of tongue weight which could be as much as 700 or more at the spring perches. Verify the rear axle. B-bodies from early 80s up through the mid 90s had a parts-bin mix and match. I bought a 94 Caprice wagon with an LT1 that had a 7.5/7.625 carrier. It happens.
Trailing arms are super wimpy. You can actually grab them while still installed and twist them by hand. That, plus the soft rubber bushings means that tail-wagging-the-dog can be intense. Many B-body guys box the channel on the trailing arms with pretty good results, but because of the wimpy nature of the rear, you would be shocked by the difference a panhard bar does.
Go-to shocks for many of us are the Bilsteins (memory is hazy... 0929 and 1142??? Can't remember right now)
If you want to upgrade brakes (and if you have the 8.5" rear), just grab everything from an Impala SS. The SS was actually blessed with very good brakes. Little known tidbit: The SS brakes are 1LE/WS6 F-body rotors that are drilled for 5x5". I towed 3500 with my SS and even without trailer brakes I found it to be quite impressive. Still, trailer brakes would have been added if I planned to tow more frequently. Basically, the SS was the only vehicle I had that summer that could tow the boat. I don't think the W210 would have been too happy.
Corvette Servo will supply more pressure and quicker to the 1-2 shift. There is a Sonnax 2-4 servo thing that some people do but I don't. Do not tow in overdrive. The 4000-lb tow rating tells me you likely have the 700r4. Leave it in D and be happy. Check RPOs for rear ratios. If it's the 4000-lb tow rating, you may have 3.08 or 3.23 gears. 3.42 was an option on the wagons but I don't think it came on the sedans. Even if it's in the high 2s, try it first. The 700r4 has a really steep 3.06 first ratio, and you won't be towing in OD anyway, so whatever is in it might be OK.
Here is what I personally would do:
Definite mods: Box the trailing arms, trailer brake controller and trailer brakes (or upgrade to SS brakes... or both), big trans cooler BEFORE the radiator. Corvette Servo (which is an external installation and they cost something like $50), and trans pan/filter/fluid if it hasn't been done recently.
Possible mods if you plan on tongue weight (not a dolly): Panhard bar and some of those rubber dogbone coil spring spacers, Bilsteins.
Other stuff I mentioned would be if you want to turn it into a Tow Rig instead of just a car that tows sometimes.