When my kids were little we always kept a van conversion. It was nice to have the TV/VCR etc to keep them busy. We had an 87 Dodge D250 long wheelbase and an 89 Chevy 3/4 ton. That was before gas was $3 gallon though. The chevy had a 38 gallon gas tank and the first time I filled it up I had to look under it to make sure I wasn't pouring it on the ground.

If I were going to do a hotrod family grocery getter I'd go with a 66 or 67 Chevy II wagon. You could go with a SBC and a 700R4 or 4L60 and get 20-24 mpg.