I towed with a 95 Sierra with a 6.5 for about three years. It was never fast, but I towed a fullsize blazer and had no problem with the pulling power. If your towing heavy in the mountains, they can get pretty hot. A fan and water pump upgrade helps a lot.
The PMD is known to go out on these from heat also. I cant remember what it stands for, but its the module on the side of the injection pump. Most people relocate them to a cooler place and they are fine.
As for the transmission, they are 4L80E's which ive always had good service out of.
I rebuilt one in the chevy 1/2 ton chassis that a buddy had.
Great truck that gave tons of service. Those 6.5 pull great but don't compare to the newer duramax engine. They must be decent as the US military fitted them into the humvee to replace the 6.2 after they added all the armor