89 ranger upgrades

I live in california, all the other vehicles I have ever modified were not required to have any kind of emmision qualification. I have an 89 ranger 4X4 with a 2.9L that has over 200,000 miles and been rebuilt once. I get horrible gas milage (15-16MPG High way) and fairly poor performance. I dont think I would be able to drop a 4L for state smog laws. I know I will never be able to make that motor "Hot" but would like to improve both performance and fuel economy. I would like to put a better air box port the heads and plenums. I would like to put headers and free up the rest of the exhaust. I would also like to put a new cam, timing, and oil pump. an aftermarket Ignition (msd 6a) the first question is how do I keep up to smog emmisions and law compatability and achieve the goals I intend to meet. the second question I have involves the 4 wheel drive. It has manual hubs (thank god.) but never as far as I know ( I know the 2 previous owners and the original owner was a doctor) the truck has never been in four wheel drive. I dont want to even try to put it in 4 wheel drive. should I look into replacing the hubs, and checking out the transfer case, gresing u joints? any input or experiences would be appriciated