What's your spring pressure? You could be right on the verge of valve float, or have some bad harmonics going on. This will kill your power pretty quick up top. Also probably not your problem but the air gap manifold doesn't always like a spacer. It helps balance the signal to the carb but I've sen it rob 10 or 15 horse from a bunch of different combos. Without dynoing your motor we're all just guessing at what kinda power it should be making. Some combos work better then others..

Do a leakdown, compression test and put a dial indicator on the valves.

I don't know what kind of distributorless ignition this is you're using but I'd be very suspect. With the same cam & heads, you should have picked up at least 45-50 horsepower and 50-60 on torque. That should give you more, not less. 36 degrees is way too much lead unless you're running high octane and more compression. You may be preigniting and not noticing. If you're running 89 octane, you've probably found your problem. Unless your boat is WAY heavy, bring the max timing in fast- even 2000 if your boat is light.

But we're still doing alot of guessing- you'd get better advice if we had the whole picture. Like cam- it's more than lift- duration and overlap mean alot. Are the valve springs new and what pressures? What is this mystery ignition? What exhaust?

This is his ignition, it is just a marinized GM HEI. I just ran one on the dyno with my 469 and I still pulled power to 6500. I know quite a few people who use them.

http://www.performancedistributors.com/marinedui.htm

Still I ask what heads he is using? If they are GM rectangle port they will support the 496 stroker kit. but if they are peanut port, they won't support the extra HP. IMO

Also like Chris said, just because it has more lift doesn't mean it will be a more aggressive cam.

I took DUI as distributorless.

Where does the RPM limiter come in at? Is it something these people have desugned into the unit? Some sort of external limiter?

After being hosed by this so many times, I never assume that any item I have not seen and verified with my own hands and eyes is the correct item and it functions properly, actually is or does. I've seen way too much mis-labelled and semi-functioning stuff come out of pretty boxes.

The heads are large oval ports ported and flowed. they are running 2.25in and 1.88 exhaust 11/32 stems ferra valves everything is port matched. 118cc the cr 9-1 also the firing order is changed 4-7 swap. according to comp the cam is good from 2000-6200
the motor is internally balanced h-beam rods, callies crank; je pistons; crane gold race rockers, the springs are matched to the cam 10 degree retainers. intake ports have been polished. Full -12 oil lines running a K&N 5001 filter, indvidual oil and pwr steering coolers. All fasteners are ARP.

GM uses the 990 iron rectangle head on their entry-level HP engines- both the 454 and the 502, 425 and 450 hp, respectively. They're seeing less RPM and using a dual-plane manifold. Your heads flow somewhat less. On those 990's, you would probably see 75+ hp with no other change by going to a good aluminum. The ovals... probably alot more. I just don't think they'd support a 500+ horse 500 cid engine.

Without knowing your cam specs and what exhaust, that would be my guess.

are you running the same carb and jetting on the 496? Chances are you are too rich on the jetting in the new carb. I am not familiar with the demons but the jetting for a Holley 800 should be close to 80 pri 87 sec with blocked sec power valve and 6.5 in the primaries. 2 jet sizes can be worth roughly 400+ rpms and 6+ mph if they are off and you did not dyno the new combo. Set the timing at 32 max to start ,the longer stroke with the same chamber heads will need less timing.

Do you have a fuel pressure gauge?
If not, hook one up to verify that fuel pressure is at least 5psi at WOT.

My jets are .82pri; ,88sec; pri 6.5;

sounds like that came just not enough for the that size engine, they say good to 6200, in what cu in ?? a wild cam for a 427 turns into a mild one in a 496...Rob