260 has less hp than a modern 300 xs and maybe less than a 250xs. For example on a xb21 Allison, due to the torque and 1400 lb hull wieght the 250 xs is a touch faster and the 300xs quite a bit faster. Don't necessarily need a race motor unless the hull is too small to support the 505 lb motor vs the 400 lb motor.
I went from a fairly extensively modified 2.5 200 (ran with most 225 promax on similar hulls) and gained 10 mph going to a 250 xs