Well there are quite a few differences between the Generation II LT engines and the Generation III LS engines.
The LT1 was a Cast Iron 350 (5.7L) SBC engine produced from 1992-1997 used on the F, B and Y bodies. The F body LT1 had 275-285 HP and 315-325 ft-lbs of torque. The Y-Body LT1 had 300 HP and around 340 ft-lbs of torque.Not sure what the B-body numbers were. On both F and Y Bodies it had aluminum heads while b-bodies had cast iron heads. There was a special performance version of the LT1 called the LT4 that was featured in 1996 corvettes with 6 speed manual transmission, that produced 330HP and i belive 340 ft-lbs of torque, but it is believe that gm underated these values. The LT also had a aluminum intake, twin butterfly throttle body, timing chain driven water pump, reverse cooling, and a front mounted distributor called the optispark (probably the only flaw in this engine in my opinion). The LT1 is a unique engine from gen I SBC, but some parts can be swapped between the two. They also share sametransmission bolt pattern, displacement, engine mounts and overall block shape as Gen I SBCs. For performance, the LT1 responds very well to bolts ons, forced induction, nitrous, stroker displacements, you name it. The price of LT1s out there is pretty cheap and can be built up on a budget.
I dont know too much about the LS1, im sure someone can elaborate on it with you. What i do know is that it was Gen 3 SBC 346 (5.7L) all aluminum block that produced 345-350 HP on Y-Bodies and 305-325 HP on the F-Bodies. I have looked at pricing on them, and they are still more expensive to build up then a LT1 from what ive researched.
Now, performance between the two. There is a HP gap in the Y-body numbers, however with a same budget spent on upgrades for both, they are pretty much equal. So its a matter of preference now, i say go with the LT1 if you want to put it in a older muscle car because it pretty much can mount directly into the points were Gen I SBCs can be mounted and it a little less expensive as well then a LS1. Of course i prefer the LT1 is because its the motor i have personally been working on for years, i have had a Lt1 camaro, and now on my LT1 corvette.
So, theres my opinion on what you should go with, both are good engines, but i think the LT1 is more to your tastes for an old muscle car.