For the broken bolts, I bet every one of us that has removed those things has snapped them, at least one! Either drill them out and re-tap, or cut a whole out of your hatch area above where the bolts go through, drill it out, and nut the bolts.
I am running just under a 2in lift with OEM shocks. I measured the geometry, and I figured at about this high of a lift, the shocks make a nice down travel limiter. And, has been working out really well. You probably wont need to space your shocks, but wont hurt.
There was once a spreadsheet going around that had a list of OEM shocks from other vehicles that worked with certain amounts of lift on the XJ. There should be good documentation on that somewhere, lots of people go that route.
For your upper shackle bolts... I think the blue lock-tite would be more appropriate? I used ny-locks for the lower bolts... Its more of a worry for them to come lose, then for them to be a little stuck. Good luck to you!
