3:08 is a relatively HIGH gear....good for high speeds on the interstate and such...not so good in city driving.
I'd get a cheap vacuum guage and see what you got. I am not familiar w/ the 86 models, not sure if you have a transmission modulator (vacuum) or it may be electronic. I know that year is close (and 87) to lots of changes.
I would readjust the carb just to rule that out or it may be the problem.
You are not gonna get much better that 10mpg for city driving...in fact that may be right on from city driving. Highway driving may get you 14 -15 perhaps.
again, unfamiliar w/ 86 models but do you have a vacuum advance in your distributor? Is it advancing...easy check....see if your vacuum keeps air. Manually advance. then place finger over where the line attaches see if it holds. Take you timing light and look at the marks whils someone accelerates. See if marks move.
Just a few things to think of.
SgtDel