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MagicRat is right on except Im not sure the bigger tires are helping his mileage. RPMs arent the MPG killer that most people think they are. What really kills MPG is throttle position. The more the throttle is open, the more air is entering and engine, the more fuel is mixed in with it.
I think your dads Jeep is fulltime 4X4 and its heavy, as square as a shoebox and turning heavier than stock tires. Physics says theres not much that can be done about its fuel economy. You are talking about spending $1000 to change out a tranny, possibily t-case, driveshafts, mounts, adaptors and so forth to save maybe 2 or 3 MPG. My suggestion is to put smaller, lighter tires back on and drive 5 or 10 MPH slower to up your MPG.
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