I had a couple of late model freelanders as loaners during garage work. In terms of reliability - well thats hard to comment other than ones I had, the exhaust rattled (2500miles) and another the roof bar whistled (56miles) the other 3 seemed ok and its debatable if wind noise is a relability thing, but given the age hard to say on longevity.
I've had manuals and autos - the first few (my12's?) all seemd to give dismal mpg (27-29) in mixed driving (60% fast a road/mway cruising) which to be honest I wasn't expecting and I tried to drive like a saint to get it higher! The last couple of autos (my13's?) have been significantly better (32-34mpg) which was more what I was expecting.
My thoughts - downsizing to a freelander 2 doesn't in my mind solve any of your problems really, like for like I'd say reliability was about the same and that fuel economy is marginally better, but not enough IMHO to 'downsize' and lose the benefits of RR
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