Yay, a thread I feel I can contribute to!! :-)
So...I also deliever newspapers. Not quite as many, about 50 during the week and 105 on sunday. I was in a similar predicament. I won't re-write everything, but I posted on cleanmpg.com, here is the thread:
The Commute from Hell - Paper Route!!! - CleanMPG Forums
Anyways, I ended up getting a 125cc scooter and mounted a basket to it. Since you have more papers, I am not sure how much I can help. But I do know I more than halved my gas cost since doing so. And it's a bunch more fun! Don't know if this helped any, just wanted to chime in and second the scooter suggestion. You could probably get a 250 and mount something on the back that covers part of the seat to create a larger basket. A small trailer might be a good idea too.
Good luck!