Location:
The fuel filter is located on top of the engine between the heads. You will notice a plastic trim piece with "Powerstroke" on it, remove the two nuts holding that on and the filter housing will be below that. It is round with a black lid.
How to change:
This is my preferred method. Ensure the key is off and place a catch pan under the filter drain (more on that in a second). One the back side of the filter housing (closer to firewall) there is a YELLOW lever. That is the filter drain valve and is used to drain fuel or water that has accumulated form the housing. Turn that valve and close it after the flow has stopped. Now you must remove the filter lid. I usually use a large screw driver to place in one of the top's ribs and tap it around. Once removed there is a beveled O-ring on the top, remove and discard that. Now pull the filter element from the housing and discard ensuring that the O-ring from it also came out. Now check the bottom of the filter housing and make sure there is not an accumulation of gunk ing the bottom and if so clean it out. Now take you new filter and install the o-ring onto the filter after lubing with diesel, if it is not already installed. Place the element into the housing being sure to seat it. Now lube the supplied bevel cut O-ring w/ diesel and place it on the top of the housing WITH THE BEVEL UP. Now install and TIGHTEN the lid. Make sure the lid is tight, if not the engine will get a diesel shower. Prior to starting the engine turn the key to run for a second or so, a few times to purge the air and pressurize the filter. Check that fuel is not leaking and if not start her up.
I'm sure I make have missed some thing and others will catch it, but that's the jist of it.
