I hate Queen, but "another one bites the dust".
Bummer that you are having so many issues with the 140 cu. in. SOHC I-4 that your only solution is to swap it for a V-8.
Before you begin the process of swapping the I-4 for a V-8, could you do the very simple burnt valve test as mentioned here? http://www.clubhotrod.com/forums/showthread.php?t=23527
Don't use money, though!
It would be good to definitively know that the symptoms you are experiencing with the Vega are indeed a burnt valve.
Thanks for posting your issues here, I learned a lot from you and everyone else who posted.
Also, the air-cooled automatic transmission in your Vega will not bolt up to a V-8 - the Vega SOHC I-4 engine used a unique transmission/bellhousing pattern.