Regear a better axle...don't throw any money at the D35. Find a 29-spline C8.25 from a mid-year 96+ XJ and regear that or build an 8.8, but spending money to regear a D35 is..."simple" !!!1
edited t oadd:
FWIW I ran 3.55 with 32s on my XJ after my 4.5" lift. While I
thought I wa doing okay with that setup, I noticed the torque converter rarely stayed locked while cruising, and I often dropped out of OD when confronted with the smallest hills. After regearing to 4.56 with 32s, the TQ stayed locked at 75mph and I was reminded that I could
accelerate from a dead stop again!
Currently running 33x10.50 BFG MTs and the 4.56 gears and it's an excellent match. Of course the Cherokee was never really an aerodynamic vehicle to start with, and the frontal drag area at 4.5" lift is escessive so don't expect to get stock mileage.
Don't forget to change your speedometer gear after changing gearing or tire size, otherwise your reported mileage claims are pointless.
Jim
www.yuccaman.com