Towing - OD light flashes and other issues

So I have had my 1994 F350 7.3 IDI for about a month now, and to say the least, at this point, I am pretty disappointed. I sold my F150 with a 5.8 last weekend, so I am stuck with it for now. I have already replaced the power steering pump and hose, oil cooler rings, and flushed the cooling system and changed the oil/filter.

Took it out camping this weekend and pulled my trailer with it. This is a 3500 lb. or so trailer, 24 foot. I bought this truck because I thought it could pull anything, and am hoping to get a boat at some point.

As I was heading up a pass - not a huge pass mind you - the truck was an absolute dog. Pulled it great leaving town, but getting up the pass, it was dropping to 40 mph and didn't seem like it wanted to downshift to push harder. Awful. Then at some point I noticed the overdrive "off" light on the shifter flashing. Figured that might be a problem.

Once we got to the camping spot, I drove it around town without the camper, and eventually, the light stopped flashing. Hooked the camper up to tow it home today, light came back on. So basically the light flashes just when towing. I've read some other threads on this light, getting codes, etc., but is it going to not have a code if I just go to the parts store and there is no light flashing? Why would it do this only when towing? There are no other lights on - i.e. ABS or anything like that.

I haven't checked my mpg yet either, but a full rear tank went down to almost 1/4 left, and I only went 125 miles. That does not seem good at all, and one reason I got this truck was hoping to improve my mileage from the 8 I got in the F150.

I must say, I was more hopeful for this truck, but so far, it seems like it is just going to be an endless project.

E40D transmission, 3.55 gears.

Any thoughts on this? Just get a code reader and hope the light comes on? Will the tranny issue help with the mpg?

And the real question - should I just go back to gas? I don't want to, but man, so far this has not been a great experience. This truck seemed to pull fine in the flats, but most trucks will pull ok in the flat areas.

Thanks in advance.