Sounds like the main issue is too many rpm's for the speed you want to run. Changing the rearend would be the easiest solution to this. If you are looking to stay with 6 lug rims, 3.07 gears were used from 63-66 in 1/2 tons and should be allright for width. Not sure if the 67-up rearends are too wide or not. Some have used full size Blazer rearends also. Not sure if the yoke size will be the same as what you have or not, likewise for E-brake cables. If you plan on hopping up the engine later on, especially if it's a six, you may find the 3.07 a little tall from a dead stop, but you can offset this by using a T5 tranny with a 3.50 or 4.03 first gear, no problem. Keep in mind the S10 is the only version of the T5 with the shifter not located on the end of the tailshaft, should the rear shifter position be a problem for you. Also keep in mind that the T5 is longer than your existing 3spd, and has a different spline count, so you're looking at a different driveshaft if you go with the T5 (or any newer tranny for that matter).
As for changing to a six, the 55-62 235/261's would be what came in that truck originally, and therefore would require only bolt-in changes in parts, but that means everything ahead of the tranny, as the V8 bellhousing is different than the 62-earlier sixes. The 63-up 230/250/292 sixes are the better engines, can be used with your existing bellhousing, etc... but will need to have motor mounts made or possibly someone makes a kit for this, I haven't looked...
A 230 or 250 is the most likely to be found in good running order for cheap, the 292 will be a little harder, the 235/261's are likely going to need rebuilding just because of how old they are by now, but you may get lucky.
you aren't likely to see any real improvement in gas milage over a 265 2bbl. that is in proper tune. Driving the speed limit instead of 80, with the lower ratio rearend will do the most good for milage.
There's is more that could be said, but I would rather answer specific questions than to write a book that covers every angle, at least for now.
