G-Force, We towed our RP175 (3400-3700 lbs wet) for a couple years with a 2006 4.0 Taco w/tow package. It did a good job in the passes, foothills, and rollers here in the Cascades of WA state. I always towed tow/haul which locks out 5th in the Tacoma. The truck would drop down to 3rd in the toughest pulls, but would do fine keeping up with traffic. I haven't towed the Cont. Divide in quite some time, that kinda elevation will sap some of the Tacoma's power. We never towed above 6000 ft.
I towed with the Tacoma both with and w/o a WDH. If you load and set up the Tacoma/Pod correctly, you can tow w/o the WDH. But there are some caveats. A WDH and sway will expand your safety measures. Also, unless equipped with the factory installed TSB 4 leaf rear spring, Tacomas are a little lightly sprung. Less chance of developing white knuckles with a WDH/sway.
The Tacoma would get between 10 and 12 mpg towing for us, as opposed to 17-22 in daily use. I would have replaced the Tacoma with another, but we got a great deal on our Tundra.