To try and help answer your questions:
The 186 or even 202 red motor is nowhere near as well balanced as well as a stock 3.3 Blue or black motor. Nor does it have the cylinder head port flow. The dis-advantage with the 186 block, as that you've got no piston options. You're stuck with the one type unfortunately. 186's put out more power - Not even close. They have to rev harder and at a higher range to produce the same output, and they don't have the good torque/power curve that a 202 has. Red motors are factory balanced to around 5,500 RPM, whilst Blue/Black motors are balanced to 7,000RPM+. Kind of takes away the need for high-speed balancing. My advice for you is to get a blue/black engine and start from there. The bigger displacement and better head port flow will be an advantage. A factory blue/black 12-port head is equivalent to the port flow on an XU-1 bathurst head. If you think the blue/black engine is **** because it's bogged down with all the anti-pollution gear, then get rid of the gear and don't be too keen to blame the engine for the problems that accessories have. I find the best thing to do is kill as much anti-pollution gear as possible and think old school. BTW what sort of commodore are you intending on putting this motor into? If it's an old VB-VK then obviously it wouldn't be smart to run a 186 in there, and IMO wouldn't recommend or waste my time with it anyhow. If your car has power steering and air-conditioning I would probably get that out of the way. Remove all its associated gear from the engine bay, including feed pipes. Use the old red laternator bracket for basics, and also the fact if you ever need to get to the alternator it's right in front you you without anything in the way. Run rack and pinnion steering and get rid of the factory fan/clutched fan and go thermatic. If you do that alone, you will see some improvement. If you are running a VK with EST, disconnect the EST wiring and run a normal HEI distributor. I'd go for one of those $80 specials on ebay. Believe it or not, they actually work a treat and don't have 30 years of wear like the old Bosch ones do and because they don't have the excessive wear they're timing is much more accurate and not out of sync. Replacing the dummy distributor will allow you to tune your engine, and you'll be able to get some more power gains there. Also stay away from cheapie spark plugs. Use something like champion copper plugs, as they have a resistive core which helps stop electrode burn-out. This is very evident on plugs like NGK and other cheapies. Also note that a lot of these cheap and nasty plugs will seize up in the plug holes and you'll damn-near have to remove the cylinder head to get these bastards out. It's happened to me with NGK on an old VH with a blue head, and also my old man with his 83' Honda Accord. Ever installed a set of plugs into an early commodore, started the engine and withing 3-5 minutes everything "idling" turns to ****? there's your answer!. Carbie options. You could play with just about anything, but for something mild it's entirely up to you. A 350 holley is a good upgrade for an old red motor, but doesn't perform as well as the varajet II on the VC/VH/VK commodore. a 500 Holley doesn't really perform any better than a 350 Holley, so I wouldn't waste my time there either. You could run a ford ADM but don't expect it to work straight off without some professional work, unless you happen to get one off the factory Ford 3.3 motors. If you could do that, then get an adaptor kit, bolt the thing on then you're laughing. Should get better running over the varajet and better economy. If you run the varajet, use a good aftermarket open element aircleaner, or cut out around the sides of the factory one to allow it to breathe. The factory air cleaners have been proven to be very detrimental to the engine performance. A whopping 20HP has been found to be lost to the engine just by using a factory air cleaner for these. It it was me, i'd go for triple SU's but not everyone has the knowhow, cash or ability to set these up.
Answer to another question: "can you legally run a 186 in a commodore". It depends on the model really. You'd probably get away with it in a VB commodore but that's about it, however you'd have to use the factory VB Commodore running gear. There's no way you'd get away with one in a VC/VH/VK, unless the copper or transport cop who pulled you over was blind. lol. Although here in Tas you could get away with just about anything, except for when they do the odd transport blitz, and even then they won't pop the bonnet unless they have a real good reason to do so.
Suggested Build and Cost:
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Use a 3.3 blue/black motor - It's gonna save you a lot of coin if you can do it all yourself. Get it bored out to 20, 40 or 60 thou. Go for the smallest bore-out possible, so if you ever have to re-do it years down the track, you can. Also, get it decked for zero clearance. Helps boost the compression a few points. Get some hypereutectic pistons to suit. These are great for long engine life and low bore wear. A good machinist will be able to do valve reliefs for you at the top of the bores for around an extra $200 or if you've got a good aircomressor, a die grinder and an afternoon you could do it yourself.
Cost: Pistons might be around $400 and the bore work may be around $400-$500 for a real good job.
Head - A basic rebuild will do the trick. Make sure the machinist replaces all of the valve stem guides, and stay away from those cheap and nasty brass inserts "K-lines" if you can help it. Replacing the guides will help give a better idle, and prevent your motor from blowing smoke.
Cost: From $300 upwards depending on how far you want to go.
You're also going to need timing gears, so go for the JP hellical ones. Years back I done auto mechanics at tafe and they'd always recommended we use hellical gears, as they slog-out a lot less and there's more surface area on the gear teeth to displace the load on. Also a lot less likely to snap a tooth.
Cost: Under $100, but you may need a machinist to press the gears on, and while he's doing that get your old connecting rods pressed on to the hyper pistons.
Camshaft. Crow have a good range. Crow 35666 works reasonably well on most carbies, but works a treat on triples. an XU-1 road/street cam would also work nicely but in the long run it's upto yourself to decide what's best. I'm a skater not an actor. I'll always go for the grind, not the stage. lol. While we're on camshafts, always get brand new lifters to suit. I like hydraulic lifters because of their quiet operation.
Cost: Camshaft Under $300. Lifters under $100 on ebay and other places.
Gaskets - ACL race gasket sets are great to use, and the head gaskets with these are quite good!
Cost: Around $130 on ebay
Water, oil and fuel pump. For the oil pump i'd just go for a JP standard replacement.
Cost: Oil pump $130. Water Pump $50, Fuel Pump $40
I think this almost wraps things up, but when you do your build be sure to use an engine assembly lube on all the bearings, in the bores, on the timing gears, on the cam lobes and lifters and cam bearings and also on the rocker gears. I always use loctite nut locker on the connecting rod threads, as this is usually how these motors pop a piston. Always use a torque wrench to torque up all bolts to correct settings. Always use a good amount of non hardening sealant on the head bolts, otherwise you'll weep heaps of water. Make sure the oil filter is well primed up before first starting after an overhaul, the carbie is primed with fuel for a quick start and you should be right to go.
Hopefully this will help give you some insight and useful information for your build
Cheers Mate!
James.