Glad to have it resurrected...
I bought an 06 with the 5.3 HO and 3.42s. I've had it almost 2 years now. Having had a 96 with 3.73s and an 02 with 3.73s, I don't care for the 3.42s. They bug me every time I drive it. I still love the truck, but the 5.3 doesn't have excess torque around 1,500 rpms, which is where you hit 55-65 mph, so it seems like poor engineering on GM's part. I'm sure they did it to achieve mpg ratings, but that's all flat-track stuff. I live in the hills (Blue Ridge Mtns) and I rarely drive over a mile without coming out of overdrive.
Seems like that's gonna wear out the tranny quicker than a lower gear would as well. And towing, man I wouldn't want to tow much with this setup. I've pulled about 800 lb and I could feel it. Shoot, I put 500-1,00 lbs in the bed fairly often, and I can feel THAT. That WITH a Blackbear tune.
If re-gearing weren't $1,400 (got a quote from a shop), I'd put 4.10s in it. 4.10s with 285s would put me back at 3.73s overall. I love these trucks, but 3.42s for anything but highway is a bad idea.
With stock tires I average 17.5 mpgs, hand-calculated (Truck computer LIES!) and averaged over 15 months (12/11=2/13, so more winter gas in there than if I did a 2 year average). I got that out of my 96, and my 02.
By the way, ZEEGMC4ME, your rpms sound like you have 3.73s. Check your glove box codes. 4.10s = 2k rpm @ 62-ish, 3.73s = 2k rpm @ 70-ish, and 3.42s = 2k rpm @ 78-ish.