Chances are the truck has been really neglected by the previous owner and it needs a full, proper tune-up.

In a 2wd it should be doing 14 maybe 15mpg without too much trouble.

The biggest weakness I see for lack of fuel mileage is no lock-up converter and lack of dual exhaust. My other guess would be hopefull it has a viscous fan and not a direct-drive.

You may gain little going 318, and if you have the 727 maybe nothing at all. I find that 727 is a power-robbing turd to a 318. Right now I have the a833OD with a 318 and it's night and day difference to every other 318 auto I have/had: With 2.94's, 2bbl, 2wd, and single exhaust it's doing 17 to 20mpg on the highway.

However, if this is all in-town driving you are talking about, then 10mpg is about right.