Sounds like the gears are not alligned/set properly. I know this stuff can be tricky and requires someone with experience to do properly. You might also consider having the metal flakes analyzed to find out what metal is grinding off.
I would go with the 1500 as it will do everything you need and will probably go to 200k with some TLC. I had an 07 2500 with the same drivetrain and never got more than 14 MPG hy empty and 8-10 city. I have no experience with the 5.3L 8 speed, my last 1/2T was a Tahoe with a gen 1 5.7L and 3.73 gears it got around 19 HY and 15 city - just don't expect it to tow 6,000 lbs.
That red light is part of the anti theft system that activates whenever you lock the truck. It does disable the radio and other ckts. It is activated when the truck is unlocked with something other than the key or fob. Sounds like that may be your problem, not the air ride.
Most dealers order HDs with Camper Mirrors as they know most folks use them for towing. As for the rest of the suspension the springs are the same, Z71 changes the shocks, tires and adds skid plates and badging.
My 07 2500HD gasser with 4.11 rear gears got no better than 14 Hy and 10 City with towing my 6k TT 9-10. My new 17 2500 duramax gets as much as 24HY and 13 City and 11 to 12 towing my new 8k TT.
All 4WD truck have the Off Road display - it is not activated from the factory however you can select it from many available screens in the DIC.
Skid plates can be added if needed - as for the Hill Decent control I am not sure if it is something that can be programmed in or not. I know that there is a need for a switch to activate it.
I just got an e-mail from CarFax stating there is a recall on my 17 Silverado HD DMax for a block heater short. I recently had the new cord from the previous recall done. Anybody else know about this new block heater short?
Apparently there is a TSB out about this related to the need to re-program a module in the steering column. If not done in time the module needs to be replaced. Just read about this on another forum. A camper was stranded when he went to start his new truck to hitch up and go home and it failed to start. Ended up being towed to a dealer for replacement of the module - the only difference is his batteries were drained.
I think the days of having several rear end ratios is long gone - I know on my 2007 HD I was suprized to have two choices by 2008 the 3.73 was NA and only the 4.11 was offered. GM is looking at optimizing the drivetrain computer systems for the best MPG/HP/Torque combination. It also simplifies the build process. There are some times with my truck that I wish I had a 3.42 or even 3.08 for better MPG when I am not towing.
I have seen this come up in the fall/winter, my solution is to just add some coolant to the burp tank, I usually take a cup or two and the warning goes away. This has happened only twice in 3ys and 35kmi
I recently got the second letter stating that they were ready for both the emissions and the heater cord mods. This was also done in conjunction with an oil change. So far I have not noticed any real change - except that the in the past the regen raised the idle RPMs to around 1k, now they are a bit less. I think the frequency of the regens is about the same- for me it was about every 400 miles or so. Now that I have retired, I am not necessarly driving it daily and using it more for hy and towing.
Do you have a remote start? does that work? In fact that could be part of the problem - newer trucks with or without remote start have the capability of it. So you don't have to hold the key in the start position-- just spring it there for a second and let off.
I would also try a different dealer or call GM directly
I love it for long downgrades - when used with the cruise control - it keeps my truck and trailer at the set speed - don't have to touch the brakes. I usually engage it along with tow/haul mode every time I tow my TT.