For an air to air intercooler, you basically have 3 options for mounting.
1. hanging below the bumper. Sometimes referred to as the "hanging ATA".
2. Modify the radiator support to fit it in front of the radiator (or remove the airconditioning)
3. Mount it above the engine and duct air to it. Referred to as the "top mount ATA".
Advantages are it's effective all times and it's stone axe simple. Short of blowing of a tubing boot or puncturing the core, it just plain. Problems are another item in the cooling air flow before the radiator, extra intake ducting, and just fitting the bloody thing in the truck. Since it uses air as a cooling medium, it must be larger than a water to air for the same drop. Also be aware there are a couple different type of ATA out there. IE: bar and plate, extruded, tube and fin, etc....
Water to air offers a few advantages and a few disadvantages. Because water is a better heat medium, the part in the turbo ducting can be smaller than an ata. It can also be placed anywhere which is often used to it's advantage to minimize the length of the piping. Disadvantages are that it thermal soaks fairly quickly on long pulls (that's a size and airflow dependent relationship), requires pumps/hoses/fans/wiring/reservoirs/etc and still needs a radiator somewhere on the front of the truck. The rad tends to be a bit small on a gmt400 because of limited space, which also limits the time it can run before thermal soaking. You end up mounting in the bumper or below it like the ATA, or modifying the core support to get it in there.
Air generally doesn't like to turn a corner more than 10 degrees before it starts to separate and enter a turbulent state at the corner. This is why "3 angle valve jobs" are effective, it minimizes turbulence as the air enter the cylinder around the valve seat or the "breakover angle" if you prefer to think of it that way. Now 10 degrees isn't practical for ducting air around the engine bay in our trucks, it just won't fit or it would be one heck of a long spaghetti like mess. Bends limited to no more than 45 degrees or a long smooth radius for turns tighter than 45 seems a more practical compromise.
WMI isn't a panacea either. You have to mount the pump, run the wiring and tubing, figure out your desired flow rate and then find a place to mount a water tank. If you don't care, you can just stick a big one in the bed and be done with it. I don't like giving up bed space for a jug of water that I essentially only use when towing, so I made an under bed tank. I custom made an 8 gallon tank for under my bed (
http://www.alcohol-injection.com/forum/install-pics/1998-k2500-gmc-sierra-6-5-turbo-diesel-3121.html) and I can suck that dry on one pull up lookout pass. In fact, it's dry before the top. Then you have to find a place to refill it. Believe me, that's not as easy as it sounds out on the road. The words "service station" don't really apply anywhere anymore......
You also have to consider that come freezing temperatures you need to drain it completely or it will freeze and split lines, crack pump heads, etc. If you go WMI, pony up and buy a kit. Don't try and cobble one together, although many have and are reported to work fine. A kit is as least designed to work properly (ie: shut off flow effectively) and most have progressive controllers which can lessen your water usage (ie: more driving time between fillups). Not to mention you have a chance of warranty or tech support if something doesn't work right. I use a devils own kit and have nothing but good things to say about the kit or Chance and The Boys are the shop. It's a little less expensive than most of the other ones out there also.
I'm not sure what you mean but using the return side for the WMI?
Do you mean parasite-ing off the water cooling reservoir to inject water?
That's not a great idea as it will deplete the water supply fairly quickly on a long pull and then you won't have WMI or water to air cooling.
My recommendation (after you confirm your rotating assembly is in good shape) would be to make sure you have the latest water pump, clutch and 9 blade fan on your truck (2000 should already be good to go). Make sure your clutch still works as per and your rad core/AC condenser/coolers are clean. Then I'd go with the larger exhaust. I would finish up with a Turbo master and a Heath Diesel program in the PCM. I towed this:
8500 lbs and a 9 foot high sail, somewhere around 16,000-17,000 CGVWR
on this route:
with the exhaust and HD stuff. The HD PCM is worth the money compared to the stock program when towing but call him and let him know how you intend to use it so he sets it up the right way for you. I had no problems, well...except that my old block popped a piston crown on Snoqualamie pass in Washington and had to be replaced. Some of the killer hills on the route were a little slower, but that was more because of the traffic than my truck. WMI made about a 50-60 degree EGT difference (helped with ECT also) with a 10 GPH nozzle at full battle cry.....
Turbo swap?
Sorry, I'm no help there. I've got a new GM8 on mine and it's done whatever I've asked of it no problem.
Now, I am going to install an ATA cooler, but it's more for personal curiosity than anything else.....