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I also think if I remember correctly
hearing that a bigger cubic inch motor was easier to control emissions.
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Not being a Chevy expert, that's the thing I've heard in the past too.
Regarding dropping the 396/325, I would normally suggest it's because of the introduction of the 454, but the 454 was not announced till later, right?
Additionally, there was the 402 and the SB400. Both were available in the big cars, right? Meanwhile, the standard 396's last year in the big cars was in 1968 since the 396-2 ended up being the only 396 available in the big cars in '69.
So what does this mean? I think having one or two applications for the L35 just didn't make sense, especially with the competitive musclecar market. The GTO had 350hp, the GS had 350, and the 442 had 365hp standard. It just makes sense for Chevrolet to drop the L35.