With stock gearing, it essentially required 2800 RPM to hit 62mph. Deleting the reduction hubs basically halves that to do the same work. A 50% reduction in rpm manifests less than 5% better MPG in your mind?
Yes, because it isn't just a simple "cut everything in half" problem. Here's how it works:
If you are rolling down the highway at 62MPH, with the engine off/disconnected, you could add up all the resistances... aerodynamic drag, axle friction, tire rolling resistance, etc. Whatever that number is, we'll call it 100HP, is what you need the engine to produce to keep up that speed. It doesn't matter what gear your transmission is in, or what gearing is in your hubs, you need 100HP worth of energy to maintain 62MPH.
The engine needs a certain amount of fuel to generate 100HP. The need for 100HP output doesn't change, so your fuel economy isn't expected to change... MUCH.
Why "much"? Because the engine is more efficient at some RPMs (peak areas of the curve), and less efficient in other RPM ranges. These changes in efficiency aren't crazy - they are a single-digit percentage usually. (This is why you can see a general line-like trend to the engine's torque curve graph, before it gets to high RPM where it just can't pull air in any faster, physically.) So at 2600RPM the engine might need 10gal/hr of fuel to make 100HP, and at 1200RPM it needs 9.5gal/hr.
That's a 5% change, not a 50% change, like you suggested.
Changing gearing, whether that be axles, hubs, or transmission, only changes the engine RPM needed to go a certain speed (e.g. 62MPH). If you expect to drive mostly at a certain speed (e.g. 62MPH on the highway, 90% of the time), you can try to optimize the gearing to put your engine RPM at the most efficient point.
It's possibly in the middle of the curve, not just the lowest RPM possible, though you'd have to look at the graph for your engine specifically (or experiment to find out).
You need to take into account transmission shift points. What happens with the 3.07:1 axles gears is that while it helps make cruising at 65MPH be at like 2000RPM, around town where 45MPH and 55MPH are common the engine is at a high RPM but can't quite shift to the next gear. If you drive a wide variety of speeds, such as "around town, with some highway, and offroad", you can't target an ideal RPM with such a specific gear change.
One of the actual Cat 3116 HP/torque/fuel-consumption curves (look at the upper black lines, not the lower dashed ones):
General-purpose engines tend to have these straighter curves, because they need to do lots of different things "pretty well", and can't specialize in anything. When you get to specialized engines, such as high-performance race engines, the curve/peaks of the graph become more exaggerated. They are really good, really efficient in one narrow RPM range, and more terrible everywhere else.
