My biggest rival at the 1/8th mile track was a camaro.
I smoked mustang gt's on a regular basis with my 4dr 2wd Yukon.
It's very possible,and not too hard really.
Your not gonna smoke really heavily modified rides with out some heavy mods of your own though.
Do you want to stick with bolt ons or can you cam it?
Your biggest problem holding you back with that truck is the fuel injection. Maxing out pressure etc.. it can only support 395 crank hp and the PCM is not mechanically able to exceed 6k rpm.
You have to go to a custom injection if you wanna get serious. I've went with a carb manifold machined for injectors with LS6 PCM,MAF,TB etc..(in building process now)
I was smoking mustangs though with bolt-on's,gears,tune and some other small stuff.
You can get as deep into these trucks as you can any other vehicle.
If you seriously want to make power with the vortec's go to this forum,it's pretty private and based entirely around those trucks and the newer ones to some extent.
www.pacificp.com/forum
This forum is where the LS6 PCM swap was concieved and brought to life,along with numerous other mods including the marine intake swap for these.
Join and do alot of searching,let me know if you need any help.
Here's a vid of my truck smoking a cummin's turbodiesel at the 1/8th mile.
And that's with A/C,full stereo + huge sub box and 20" wheels and just a few bolt on's/75hp n20 and my own custom tune.
And a pic of my favorite yukon from the forum-Like I said you can make some power with these.
HP is a measurement of torque-HP means nothing,torque means everything.
4l60e has gotta go if you plan to make any power-4l80 is where it's at.
Don't do burnout's in a 4L60E,if you shift to 2nd and catch traction then your done-it won't pop right then but they can't handle it.
Go with auto-programming can be modified to shift better than any manual.
Go 350 of course-There is a 383HT gm crate engine that will drop right in to these trucks(see part on injection though,you won't realize full potential till you upgrade it)
If you don't need it,don't get 4wd. More weight,less gas mileage.
My current build is a 2dr 4wd convertible-I am converting to full coilover AWD though specifically or I would have the 4wd.