Nice job! When most people say they converted a 3/4 ton to a one-ton all they did was put more leaf springs in it. You actually put EVERYTHING in (expect maybe the hydro boost brake system?) and anyone who really knows trucks knows you DID substantially increase your GVWR. The hard parts are all there. There will always be the guy who says if the factory didn't do it, it didn't happen.
I've done all that stuff a few times myself. One of my old trucks was a Ford that carried a camper and towed a boat with plenty of power (a very "built" '68 428) and it was also a 4-speed and 3.50 gears, similar to your truck. That truck was right in the happy zone empty but the gearing sucked under a heavy load. The jump from 3rd to 4th was just too big and I had a hard time holding 4th up hills under a big load... and I had a LOT of horsepower. Gas motors just don't make their power at low enough revs to use tall gears with heavy weight. I swapped the entire chassis of that truck for another using 4.10 gears and it was a much better heavy load rig. It used to spank all the diesels about 17 years ago. (Not now!!!)
Your rig sounds perfectly up to the job, all except those tall gears.
The transmission will handle it, that K20 would have come with the same SM465 my '86 K3500 dually has.
I've had a 14,000 pound load (camper plus trailer) on my '86 GMC many times over many mountains without issue. Sure it's a little slow, but it gets there. And unlike a more powerful modern truck, if something does go wrong, you can open the hood, see it, and fix it easily and cheaply! But mine is a 454 with 4.10s.
I have a friend who carries a very heavy 11.5 foot camper and tows an enclosed trailer full of snowmobiles over the mountains with a '77 Chevy 4x4 crewcab dually with a 350 and 4-speed but he has 4.10s. And he's looking at doing a 383 stroker.
If I had to choose between the truck with the 350 and 3.42 gears and the '97 7.3 diesel, I do think I'd use the diesel.
2017 Northern Lite 10-2 EX CD SE
99 Ram 4x4 Dually Cummins
A whole lot more fuel, a whole lot more boost.
4.10 gears, Gear Vendors overdrive, exhaust brake
Built auto, triple disc, billet shafts.
Kelderman Air Ride, Helwig sway bar.