I just compared my own campaign (fuel efficiency 0.5) and Steve´s Space Race (fuel efficiency 0.4)
In my campaign, a size 2 missile with 0.5 fuel has a range of 90 mkm
In Steve´s capaign, the same missile has a range of 112.3 mkm
Now, if range is directely proportional(sp?) to fuel efficiency, 90 mkm at 0.5 means a base range of 45 mkm. Dividing this by 0.4 and we get 112.5 mkm which is close enough for me.
So I think I can be confident in saying that fuel efficiency indeed increases the range of missiles.