A 78 LRE and an 85 swb D150 should be the same frame. What trans does the 85 have in it now? The rear axle in your truck could make a difference as well.

If the 85 currently has a 727, or a 4 speed OD, the current drive shaft should work. If the LRE driveshaft is available, it would also work, provided your truck is a standard cab with a 9 1/4 rear axle. All you need is a driveshaft from a short box truck, with the same cab and the same rear axle as yours that has a 727, built between 73 and 93.

As far as the motor work, the same things done with an LA 360 will net more power then the 318 will. Gene