This is something I've been thinking a great deal about as well recently. Now that I have my boost gauge installed, I can see that most of my in town driving uses only 1 or 2 pounds of boost. This is with a 21. 5 cm2 housing.
Going with a smaller housing means that boost will come on earlier. Because increased boost at a given rpm means an increase in the effective compression ratio, we get more a more efficient burn assuming that fueling stays the same.
Now, it goes without saying that most "city" driving tends to be relatively low throttle (especially unloaded, which is the case with both 6BT's truck and mine). Because boost should come on much earlier with the 16 cm2 (or smaller), milage should increase. For example, with the stock housing, when I accelerate from 0 to 45 MPH, I typically see 3 or 4 pounds of boost with my 21. 5 cm2 housing. However, if that were changed to a smaller housing, I might see 6 - 10 pounds of boost given the same throttle level (or 3-4 psi boost with less throttle). Granted, I'm guessing on some of those numbers, but I hope you see my point -- more boost = higher relative compression = greater efficiency.
Mike