Not trying to cause confusion, but you said that you think you'll get better gas mileage with the posi trac?... I guess I never heard of that. As for the 69-350 setup, I would have thought it would have come with a th350, 3 speed vs a 2 speed trans. If so, I would think the th350 trans bolted to the 78 400 with the 10 bolt rear would be plenty for cruising and the occasional punching it down. But its up to you, ...your money.. etc.., and yeah, the 700R4 trans does have overdrive which would help with mileage..