Would the 3" exhaust increase the MPG along with the hp?
Not really. Taking the muffler off and installing a glasspack or other free-flowing muffler will help a little, but it'll be barely noticable. You need more air /in/ to the engine.
I realize that the 7.3 powerstroke have almost twice the power with the same amount of displacement. Is it more because it is DI? or is it more electronically controlled?
It doesn't. Again, it's rated at(for even the 2002 model year) 250 crank HP/engine HP, which dynos to around 190 at the wheels.
Older 7.3 PSDs were rated even less.
It's more than an IDI makes, stock, because it does have a turbo which pushes some extra air in there.
BTW, here's a good article from 1992 from Banks testing the turbo kit they offer:
http://web.bankspower.com/magazine/banks-sidewinder-turbo/
It's actually a really nice read. They actually managed to get 135HP out of a stock IDI, but it was also a 1992, and brand new.
Here's an article about performance for an '02 7.3 PSD:
http://www.fourwheeler.com/how-to/powerparts/
Made 202HP stock, 305 with the Banks PowerPack stuff installed.
The stock number being the important one.
Another thing to point out is that elevation matters when you are talking about 'power' - With a N/A engine, you lose a lot of power going up in elevation, due to the thinner air. With a turbo, you still lose some, but not much.
I'm at 2,000ft elevation where I am, and all of the dyno tests I personally watched were at that 2K elevation. The others(in forum posts and articles), I don't know.
They are supposed to apply a correction factor to the raw dyno numbers so everyone can be comparing apples to apples, but it doesn't always happen.
And, as I've said earlier, it's very important to make the distinction between crank HP and wheel HP; the former can only be measured with the engine on a stand; the latter can be measured by simply driving onto a big drum and spinning it with your rear wheels.
The former numbers will be higher due to no losses; the latter is a good representation of 'reality', as all of the other losses(gearing losses from transmission, transfer case, driveline, rear axle; fixed loads like the fan, vacuum pump, alternator, PS pump etc) are all taken into account.
That Leece-Neville alternator is one of the best. Putting out only 13.5 VDC is an indication it has one blown or more diodes. Take it too an alternator repair shop.
I thought he was only getting 12.7V; not charging at all?
Ford 1Gs put out 13.5V at low idle, though. High idle they put out 14+
You cannot change or set the injector pop pressure without a pop tester, very small shims have to be adjusted to set the pop pressure, each .001 thickness shim raises the pressure ~50 PSI. The shims are not available unless you would get them from a hydraulic repair shop.
Or old injectors if you have a set.
And no, it's not a linear relationship like .001 = 50psi. /around 1800/ that is true, but if you were at, say, 1400 you couldn't add .008 and expect it to be 1800. It might be close, but it won't be exact.
That's just my own personal experience talking after having re-popped several sets, and actually re-built two with new nozzles.
Pressure can be set from 1850 to 2000 PSI. You have to be Hospital Clean when working on them. Your better off buying a new set from TYP4 or ConestogaDiesel.
I'd recommend R&D IDI Performance myself. Conestoga's prices are really high, and I know for a fact that R&D injectors come with brand new nozzles. TYP4s do as well, the same exact nozzle.
And yes, I've tested the R&D nozzles both new and after 10K and was really impressed.
. there is no space for it without major modifications. 
