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Yes, you'll need to change the transmission. The FE engines have a unique bellhousing bolt patern.
What you do is up to you. If you just want a stock rebuild, I'd stay with the 400. You're looking at a lot of additional expense to switch back to the FE engine.
FE's can be made to perform but that's getting expensive.
I say go ahead and work with the 400 since you already have it. With a few mods that will not add much expense to a rebuild, the 400 can put down some decent power numbers.
As Mike said, what you do, is completely up to you.