Most guys will say forget your 305 and build up a 350, the fact is yes 45 more cubes makes a differance in both torq and horse power.
That point is made every time this subject is brought up and the true answer to initial question never gets answered.
The fact is yes you can get a lot of hp and torq out of a 305. Not every one here is interested in building a race ready lumpy cam drag car. Some guys here just want to keep their clean mostly original G bodies clean and original with numbers matching enignes, and simply want to get a bit more out of the 305 that GM put in their cars. Simple things like a better cam, timming gears and chain, intakes, headers and dual exhaust, rebuild the carb or even a better aftermarket carb, better ignition, plugs & wires. Do some or all of those mods as budget allows and the 305 will wake up, do them all and your 305 should give you one horse or better per cube.
Keep in mind that most performance parts for the 350sbc will bolt right on your 305, and vice versa, so down the road if you want you can swap most of the performance parts you put on your 305 on a 350 if you desire the extra 45 cubes.
Even the LO3 fuel injected 305 in my 91
Roadmaster wagon has more hp and torq stock than most 350's had in the late 70's and early 80's.
the bottom line is, it's your car do what you want to do and stay with in your budget, and Never forget to have Fun with it.