With a loss in mpg's along with power, it is likely has something to w/compression, spark, or timing. I would start by pulling/inspecting the plugs, and do compression check, along with inspecting the timing chain.
If you haven't found it yet, here is a link to a
'93 Toyota FSM, that will basically walk you through everything from trouble shooting to repairs. While it is for the '93 model year, it will work for the '89 just as well.
