You're not insane, but there will be a few things you'll need to change up in order to make it work, and there will be plenty of parts on the 78 that won't work for the 74.
Starting in 1977, Honda changed the output shaft of the engine, and offset it 10mm further outboard for clearance issues running bigger chains and fatter tires. The engine is a direct bolt in, but the chain line will not be straight. It's pretty easy to correct, however.
You'll have to change sprocket carriers on the rear wheel to make this work properly (use the one from the 78), and it will likely require different axle spacers on the sprocket side. I cut down one on a lathe, but I'm sure it could be done with careful use of power tools.
http://forums.sohc4.net/index.php?topic=112622 is the thread where I fit my early engine to the late frame, and got the driveline set up. This is the opposite of what you're trying to do, but it should help.
There are a lot of small differences between the K2-K6 bikes and the K7-K8, and even more differences between a K4 and any of the F bikes.
In 1977, the K bikes started using the F style oil tank- that means slightly different oil lines- you'll want to swap the oil lines from the K4 engine.
Most of the accessories on the later bikes will be different than the early bike. Fenders are different, brake caliper design changed a bit, different dashboard and gauge setup, etc. The frames on the late bikes are a bit longer, the seats and tanks don't swap directly either.
Not the best parts bike to get, but parts is parts, as they say. Good luck- hope this helps!
