David, I've raised that point over the years with a good number of people, and nobody seems to think it matters, so I don't bother any more, but I do think you're right. Other people have told me that at highway speeds the tires "lose" that flat spot and the full diameter is accurate to use in gear ratio calculations. The problem is that with the inaccuracies of the equipment we're dealing with (cheap electronic tachometers aren't that accurate from day to day and a speedometer design that comes from just this side of the stone age) it's approximations at best. I guess the bottom line is whether it's 76 or 78 mph (or whatever the numbers may be), use it as a comparison tool.
From what I've read, I'm of the understanding that your thinking the Subaru engine can "pull taller gears" in these cars is correct. A large (2200cc's or larger) VW aircooled engine with a 5500 or 6,000rpm redline will have a very similar torque curve, but being watercooled, the subie isn't saddled with the minimum rpm cruising restrictions that our beloved aircooled engines have to live with. Ask around some more before committing, but I think you're on the right track. And if (for whatever reason) the 3.44 doesn't work out, I'll buy it off you.
And David- call me Al; ALB sounds so...you know....formal... And come on; you know the tune....
And Ted- Hey, no sweat. Remember, though, as you're driving that new 1915, that another 250cc's (and the increased stroke) will transform your car! And whether it's 76 or 78mm it'll all be good!