The stock 289 had an advertized net BHP of 174 and net torque of 252. The 260's numbers were 136 and 226 respectively. The 289 also had a 9.3 (standard) compression ratio versus 8.8 for the 260.
As far as I know, the biggest difference other than the bore to get the larger displacement (stroke is same) is in the cylinder heads. Bigger exhaust valves (1.442" versus 1.381") and a much more efficient combustion chamber design. The 289 heads were said to breath much better. They also have a better spring valley design, and I believe screw-in rocker arm studs. The 260 heads have pressed in studs.
So when it comes to doing a rebuild, or getting a rebuilt motor, you get more for the same amount of money with a 289. In the earlier days, swapping the 289 heads onto the 260 block was an acknowledged "sleeper" upgrade. So why spend the same amount of money on a rebuilt 260 head as you would on a 289 head?
Doug is right about piston choices. I looked into getting higher compression 260 pistons about 10 years ago. They would have had to be custom made and cost about $800. I doubt things have gotten better since then.
I cannot comment on how much better the 302 motor is than the 289. Firing order is different and I think they may sound a bit different. I do know you can get later versions of them that are specifically designed for a roller cam. Earlier versions, as well as the 289 can be adapted to a roller cam set-up, but I believe the selection of cams is also specialized and perhaps a bit more limited.
One thing to keep in mind for originality purposes is that our 260 blocks have three freeze plugs on each side whereas the Falcon and Fairlane versions had only two. So an old, rebuilt block from one of those is not desirable from that viewpoint.
In the early days some said our OEM block is really a 289 block with a 260 bore. (They were supposedly made in Canada in an industrial engine plant since by the time Rootes got around to ordering them Ford had already moved on to the 289 for its US cars.) Others said they could not be bored out to 289's, despite the identical external appearance. Does anyone know definitively?
Cheers, Gene
PS: People have also built up strokers based on the 289 ( to 331's) and 302 blocks (to 347's). I have started and almost finished a 347 but have it on hold. Should get about 350 horses and 400 ft. lb. torque. I told my son the other day that the 260 is running so sweetly these days, I really do not need a 347. He responded that "Dad, no one needs a 347..."