An LS7, in your application and for your type of use, would work just fine with a wet sump pan...as long as the correct oil pickup setup is available.
Are you sure that you have a Dana 44 and not a Dana 30? My understanding has been that the automatic-equipped cars had the much more marginal Dana 30 in them...or was that just later with the C4s? As far as the Dana 44, it has been in use by the off-roaders for decades and they pound hell out of them with little trouble. Additionally, IIRC, C4 stick applications (including my GS) all had aluminum-cased 44s in them...and tons of them were drag raced without too many problems. Manual-equipped dragging has to be much harder on the pumpkin than any kind of street use with an automatic, so you'd probably be good to go there as well if you do, in fact, have a 44...