My apologies if this posts twice - it hung up after I pressed the submit button before...
Yes and no.
Colder air is more dense. More dense air means the engine increases fuel flow to maintain air/fuel ratio. More air and fuel means more HP, if everything else is the same.
More air and fuel doesn't necessarily make your engine more efficient, so there is no guarantee about MPG. Most likely, you will drive like you have more HP (i.e. more aggressively, because it's fun all of a sudden) and your MPG will decrease.
K&N setups, along with all free-flow intakes and exhausts, do decrease the amount of work the engine performs to breathe. From that there is a minor increase in MPG and a noticeable increase in HP. Their new cold air setup is designed to draw more from the outside and less from the engine compartment, and that's where they are getting cooler air. Hot rodders have been doing that for years and it does work. Just remember, you are giving up the water trap of the factory air box when you go to a cone filter....
01 Sport, front drum brake & birfield joint conversion, custom '4 Wheel Drive' stickers, neon washer nozzles, chrome type 'r' oil pan bolts, wooden bead seat pads, racing exhaust tip, offroad license plate frame,
lots of misc. stuff (2.5" Skyjacker springs, 1" BL, 1"MML, Custom flat tcase & engine skid, RE arms, Skyjacker shocks, JKS Discos, Superlift Trac bars, Garvin bumpers, Warn 9.5ti, Lockright & trac-lock, 32" BFG KM's, Kilby & warn skids, EOR rocker bars, cowl snorkel)