I was going to respond like I did b4 about chips like TS and DP, but I didn't want to get DDP yellin at me again
However the bone I have to pick is the "K&N drop in"... I would suggest against that...
Anyways, yes... IF you keep your foot out of it you will get 1-2 more mpg. However after you chip it, good luck doing that. More realistically you'll decrease between .5 and 1.5 mpg since you'll be doggin it everywhere.
Actually 16mpg sounds good for a truck with 246,000 on it... and it'll be awhile in fuel savings before you can recoup that mola shelled out for Gauges, Intake, exhaust and chip... (the first 3 mods can be changed around, but the last one can't).
Cheapest way? Tymar style intake, Straight pipe/BigTruckMuffler, Isspro's got some nice "stock" looking gauges for around 300 last time I checked, and a chip *insert name here*
You can also do fuel tank mods, resistor mods, zoodad mod, stock size tires, and keep it under 2000 rpm's. I know of a guy who REGULARLY gets 23.5+ mpg with his mods ina 7,xxx lb superduty... (not sure of the cab config but it was 2wd)