Changing tire size back to manufacturer recommendations.. will it help ride and gas mileage?

The 265/70R16 recommended tire size will be one inch in diameter smaller than the current tires, so the car will sit half an inch lower. It won't make a very significant difference, but your speedometer should read properly with the recommended tire size. Smooth ride and gas mileage are more affected by tread pattern. It depends on what terrain and conditions you drive your vehicle in. The Duratracs are good off- road and in mud or snow, but if you mostly drive on the road and don't see much snow, you could go with a different tire with less aggressive tread, such as the Wrangler SR-A, or even the Assurance Fuelmax if you want really good gas mileage, but I wouldn't recommend the fuelmax tires in the snow.