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160 is a bit low. If you are up to it then the best thing would be put a new set of rings in it and replace the exhaust valves at the same time.
You can do the rings without taking the motor out just pull the head and oil pan and just pop each one out and swap rings and rod bearings then put it back. If you have a hone you can lightly hone the cylinders. partsdinosaur.com has an xfi ring package and exhaust valves. The cheapest place for a gasket kit with new head bolts is ebay. The whole setup should not cost more than $125 or so and will make the engine as good as new.
As far as engine timing look under the hood at the sticker and it will show you what 2 wires to jump on the factory plug near the drivers shock tower. Just jump those wires then set the timing like normal. Take the wire off and check timing again to make sure it is working properly(moving when you rev it) and you are set.
A properly running xfi driven easy should get you around 52mpg so if everything is good you should be right around that. With the rings worn and a slightly leaking exhaust valve you are probably going to be around 40mpg with it. But the good thing is these are very easy engines to work on so it is not a big deal to put rings in it.
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