I wouldn't put a preference on a .961 over a .960 simply because everything you need to make it work is already in your car.

If you find a .97 block with an ID tag riveted to the bellhousing flange ahead of the block heater, there's a good chance it's a factory replacement block with beefed up rods. There's no guaranty the rods won't bend but you're that much further ahead.

From my experience with a W140 3.0 swap, you'll notice the loss of low end torque of the 3.5. The turbo in a 3.5 is just gravy around town. gsxr will tell you to do a 606 turbo swap

Sixto
87 300D