My 350 is actually better on gas around town than my 3.8 was. You just need the proper selection of gearing and carb to get there. Run a well setup Quadrajet and you'll be happy with the results. Remember that with the larger, more aggresively geared drivetrain, you won't need near as much throttle to get it moving. Plus, the Q-jet has the same size primaries as the 2 barrel on the 3.8, allowing for: decent part throttle acceleration and mixture velocity, great low RPM vacuum signal and therefore better fuel economy. Plus, the air valve secondaries allow the carb to open only enough for the actual airflow requirements of the engine-provided the secondary air doors are properly tensioned. Mine is set up for good driveability and fuel economy instead of high RPM HP.
Here's my combo if you're interested: .030 over '77 350, 9.5:1 compression, World Products SR Torquer Heads with 2.02/1.60 valves, Edelbrock Performer intake ( scored for $15 at the U pull it), 1979 Quadrajet carb out of my neighbor's garbage ( no joke!), $10 HEI with Accel coil and cap, Edelbrock headers and Y pipe for G code MC SS, Mild Crane cam with :270/276 duration, 440/454 lift and ground on a 114 degree LSA. The old dyno sim on my computer says it makes around 340hp and 400 ft lbs of torque which seems likely, but may not be accurate. It idles smoothly at 750 RPM and has alot of low end torque. Oh, and for a trans I have a TH 200 4R and that runs back to a 3.23 rear driving 245 50 16's.