There would be a reduction in both BHP and maximum torque with a corresponding reduction in compression. However, that does not mean that a lower compression engine would deliver less torque at all points in the rev range compared with an engine with higher compression. Having larger diameter exhaust manifolds can be beneficial when it comes to maximum horespower, but at the same time it can be detrimental to torque delivery at low revs. On the 3500S with its manual gearbox the larger manifolds provide a benefit, but on the 3500 with its automatic transmission the loss of low rpm torque would be both detrimental to fuel economy and throttle response.
At the end of the day though, BHP is largely unimportant. Torque and especially a nice broad flat torque curve which is typical of a V8 engine is of far greater significance. Our V8 engines in OEM form deliver lots of usable torque from not far off idle peaking not far off 3000rpm, and then gradually declining from there. An engine is at its most efficient at the point of peak torque, and having that peak at a point in the rpm range which is frequently used is of great benefit.
Ron.