7.3 is the way to go imop.
I have an 02 and spent the first 150k miles pulling my toy hauler, driving it do work and taking it to the drap strip. I upgraded it with a custom multi function chip, 4" exhaust, big ass industrial injection turbo, cold air intake, and nitrous just for the strip, never got it on the dyno, but my 2 wheel drive short bed crew can ran 13.9 to 14.9 at altitude at LACR, traction was always the bigger issue. With the chip on Full power I got as much as 25 mpg if I was easy on the throttle. It now gets 21 mpg with the chip on "tow safe".
Now the down side...
The HUEI injectors have a life span of about 150 to 190k miles. Typically you would replace the HPOP at that point as well. This is not a cheap fix, I believe this was a $4 or $5k fix from a shop with just stock injectors. You will know you need injectors when you have a real tough time cold starting and rough idle while cold. As far as the tranny, I got lucky. I only have a slight shutter from my tourque converter while heavy towing. This is mostly my own fault as I did one too many stop sign burn outs while my trailer was attached, and vuala, dumb ass. I wore out the factory limited slip long ago as well. I have a friend that went through numerous trannys in his lifted 02, but that problem was resolved when he decided to regear his axles. He would fry his tranny towing heavy loads for long periods, which would cause the tranny to overheat.
Another dumb thing I did was running the cold air intake without any type of sock over the filter, and running it to the desert. This detroyed my turbo and valves and I ended up with such bad blow by, I couldn't drive it because of the blue smoke trail behind me. I pulled the motor at 200k miles and had the long block rebuilt, new STOCK turbo built, all new injectors and a new HPOP. $5k later and my own labor Doing the R and R, I have a brand new truck again. I found out from the machine shop that my blow by was caused by 3 broken compression rings, my own dumb ass fault due to the huge nitrous shot and detonation.
So lesson learned, these are not good race trucks, but they make great daily drivers, tow rigs,and if left stock, will last you a long time.