My xB got 20mpg for the day of moving stuff .3miles each trip and a light that was always red just after I started up - my average is usually a little over 40mpg per tank. The shor trips kill mileage and I find that if I really take it easy when cold I can still get good mileage but that idling at .4gph for 30 seconds kills the mileage.
I'm getting 37 to 41 mpg with a 3 speed auto (mostly highway).
Junkyard engine is getting less mpg now. Suspect it is due to dragging front brake calipers (Never resurfaced calipers and went through two brake pad sets). Pirelli P5's may have bring it down a bit as well.
New mpg estimates may improve through better coasting performance and visual gas gauge estimates.
my friends 98 corolla has been thru 3 wheel bearings in 2 years, id check that and calipers. jack up a front wheel with parking brake set, car in neutral, see if the wheel turns somewhat free. they should be equal on the front. the rears should freespin for awhile since there should be little resistance.
also have u taken it to get the alignment checked?