I towed with a similar vehicle, a 1999 F150 with a 4 speed automatic. It was the same thing, I could tow in 4th if there was no wind and the road perfectly level. Anything else it would gear hunt. Obviously the gears are really far apart and the gear changes are somewhat jarring. Never had a problem with the engine/transmission and the trans had 190k miles on it.
I would never throw serious money after an old truck. The new and newer used are so much better. My 2015 ecoboost F150 has no trouble running at lower RPMs since with the turbo it can just add more fuel. RAM has had an 8-speed for a while, which solves the problem in a different way. Chevy had their 8-speed transmission available on the 6.2 earlier and I think they moved it to the 5.3L V8 as well. Next year Ford will offer 10 cogs AND turbos, you can see where this is going.