I just got a 87 xtracab 4x4, it has 31x10.5/15 on it that are 11 years old, so they need to be replaced. Going by my GPS the speedo is about 5 mphs off at 65. Speedo says about 65, GPS says 60.

I was told the speedo gear was changed for bigger tires, which I think means is it set up for 33 or am I calculating this wrong and it is smaller tires? or is there a gear that can be changed to correct the error?

 

Your numbers make sense:

If you have smaller tires than what the speedo is calibrated for, it will read fast. So yours was probably setup for 33's.

And the opposite way, if you have larger tires than what the speedo is calibrated for, it will read slow.
(I have 35's, my speedo says 50 but I'm going 60 by my GPS)

 

I agree 33's would give you an almost accurate speedo.

I kept my speedo almost accurate by upgrading the gears in my diffs at the same time I put my 32.5" tires on. Not sure about changing speedo gears.