You are aware that the k241 is 10 hp. and the Onan is /was 18 hp, aren't you?
I don't know how it would react in a 318, but a k241 in a Cub Cadet with with Hydro is kinda weak. It lugs the engine. It really wants a few more ponies under the hood.
If it was me, I would re-power with a twin cylinder Kohler Command, Briggs and Stratton Vanguard, or Honda twin with at least 18 hp. 20 or more prefered. The Onan has a much heavier flywheel than anything made now, so it had more lugging power. The newer engines want to be near their rated rpm to really develop good power.
Any of the suggestions would require fabricating engine mounts, probably lengthening the driveshaft (If you are going to use the pto to power the deck) and electrical modifications.