If you run the engine cooler then you can run more timing or a leaner mixture to gain more cylinder pressure (AKA more HP). But for that to work the cooling system must be able to maintain cooler temps. A 160 Thermo is for a mostly track car that sees some normal driving.

Tuning is not for beginner. There are a lot of factors that go into a tune and it should be left to someone who has spent years learning this stuff. Mail order tunes are fine for near stock cars like yours and the before mention Tuned by frost is a great place to start. I plan on doing a few bolt on mods to my Ls1 and then I will get a Frost Tune/PCM.

 

My stock 98 Trans Am (LS1) gets about 18-19 mpg in suburban driving, 27 on rural roads.