Basic Motor Common Sense 101 - All motors are tuned based on four basic parameters: Best Mileage, Meet the Noise/Emissions Standards of the Time, Most Power, and Durability/Longevity (some would say just enough to get past the waranty period). It's a balancing act based on overall efficiency - if you want more power, expect to use more fuel, emit more pollutants, and possibly shorten the life of the motor all to one degree or another. Better fuel economy sacrifices power to some degree, and you can put all of these into one combination or another until we all get nauseous or go barking mad.
What your mechanic is saying is that you most likely sacrificed mileage for more power when the previous owner installed the Flowmonster, and if you're looking for the best mileage that this motor can offer without sacrficing too much in any of the other areas then the best balance would be to restore it to factory spec. Unless you have the time and money to try any number of combinations and permutations of intake and exhaust systems, air filters, fuel systems, gearing, etc. then run it on a dyno and emissions analyzer over and over and over again, then I think we can presume that the factory got it as close to Good as you can expect without taking out a second mortgage just to find the same thing out for yourself.
Think about it - if a Flowmonster muffler gave your Tracker more power without sacrificing anything else, then dollars to doughnuts the factory would have installed something like it when it was being built. However, for the little more power and noise you got, you probably ended up using more gas and putting out more smog (and maybe even toasting your exhaust valves a touch). A 1.6L motor doesn't pump a lot of air so you don't really need that big of an exhaust.
Cheers - Jonathan
Is this true? It goes against all I've ever thought. If anyone has ideas/experience on this, I'd appreciate hearing from you. Thanks.