Yeah, a big block with an NV4500 would be a nice combo, and would have a lot more HP. I just checked a few dyno charts, and they both have about the same torque and HP up to around 2500 rpm, but then the 8.1 walks away with over a 100 hp more at 4000 rpm or so, stock 2003 8.1 vs 6.5 at 13 psi. 250 HP is plenty for towing my trailer through the mountains around here, so I'm pretty happy with what I've got now. I can tell you the stock 350 TBI with 200 hp was not quite enough, I'm not a fan of doing 30 mph up a steep hill dragging a 5000 lb trailer. I'm hoping to get close to 20 mpg (15 towing) at 60 or so with 3.73 gears and OD, the k3500 it came out of got around 14 mpg (towing or not, didn't seem to matter much) with 4.56 gears and OD for the last year I drove it, vs around 10 (under 7 towing!) in the Blazer with 4.88 gears and no OD. How about you? :-)
As for the A/C, are you kidding? :-) I'm just relocating the A/C under the dash, not getting rid of it! Converting to the non AC heater on the firewall was actually pretty easy using a section from a donor truck at the junkyard, I just measured about an inch larger all the way around where the A/C unit was on my truck, and cut it out of the donor truck. The same truck provided the under dash A/C unit. The condenser is about half the size of the one in a Suburban, but it should do fine in a Blazer. One slight setback, my N4500 shattered the front input shaft bearing, so I'm waiting for the new one to arrive from the midwest next week. Ouch.
Gas vs. diesel wins everytime in favor of big gas it seems. 
Not fast revving, but it feels about as fast as the old 350 ever did while driving. You have to be careful shifting, short shift it everywhere or the truck likes to bounce around, and take your time moving from gate to gate. Almost enough torque to take off smoothly in 3rd with the 4.88 gears, but not quite. I seem to be shifting into 5th by 30 mph around town, and it pulls most hills in 5th from 35 mph up. Startups are easy, easier than the 350 was with the tired old TBI on it. I haven't kept really good tabs on mileage for this first tank, but I'm pretty sure it's between 10-12 with about 200 miles towing 5000 lbs on fairly flat ground (pulled most hills in 5th with the trailer!), and 100 miles commuting to work in city traffic. Cruising twisty gravel roads at 20 mph is perfect, just leave it in 4th and idle around. Next stop, 3.73 gears, once I figure out how to transplant the Detroit locker into my spare axle.
