5.3 is the way to go. Its the best mix between performance and cost. Plenty of people have already done the swap in your generation truck and lots more are in the process. I recommend looking for a gen III 5.3 (99-06) as opposed to gen IV (07+) just because they are more common and cheaper as well as parts are more common. If you find an 07+ for a good price then go for it. One recommendation I have and Im sure many people will back me up on this - buy a complete pullout rather than a a longblock and try to build it. Try and get all accessories, wiring harness, and computer with your engine. Believe it or not, it will save you in the end.
For mileage, I recommend and air intake, headers, and most importantly, a good tune. Gears have a lot to do with it too but if you go to high you will lose a lot of that pulling ability you need.
The cost of the swap will depend heavily on two things - how good a deal you get on your motor/trans, and how many mods you do. I spent roughly $3000 on my swap (mostly because of mods) but have seen it done for less than $1500.
And ya, your friend was right, this site is the best place to look for information on your swap.
These might spark your interest -
http://www.ls1truck.com/forums/lsx-t...tepside-6.html
http://www.ls1truck.com/forums/lsx-t...0-project.html
there are others just do some searching
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