Is is better to set a Thermostat Differential at 1 or 2 degrees? Pros and Cons?
Which setting is better for the equipment? Which is more efficient?

That is a loaded question which can only be answered by the person living in the home. If youtry to control the system with a to tight of setting it can cause short cycling of the equipment and if to long can cause wide temperature settings.

A 2 degree would be preferred instead of a one degree in most homes.

Which setting is better for the equipment?

Actually the equipment will not care but your comfort will. A longer rest time between on and off cycles is always a good thing but really plays out bad for your comfort.

Which is more efficient?

I have no answer for this one but when you find out post the results here.