Prairie Dog,
I, also, have an '03, 3500, SRW, NV-5600, 6 speed, 3:73, 4X4 and tow a 25" travel trailer. I live in Phoenix and do most of my towing in the mountainous western U.S. Lots of uphill & downhill. I have the Smarty Jr. and have towed in all three settings. In the Performance Setting, I do notice when going up long, steep hills, that the exhaust gas temps. get a bit warm where as in Setting 2, the Towing Mode, it doesn't seem to matter what hill is in front of me, the exhaust gas temps never get dangerously hot. There is not enough difference between Settings 2 & 3 to make it worth worrying about the exhaust temp everytime I hit a hill. While towing, there seems to be very little difference in engine power and certainly not enough to risk any damage to the engine by running in the Performance Mode, Setting 3. Driving around town without the trailer hooked up, using Setting 3 is no problem. I've never noticed the exhaust overheating like I do with a load and going uphill on the same setting (3).
I like the Towing Mode (2), especially when towing. Works great!!! This has been my experience. Hope it helps. I like the Smarty Jr., also. I've also towed from San Diego to Toronto and Seattle to Charleston, WV. And plenty of towing in the Western States and mountains.