Both these questions have been beat to hell, use the search function and you can get answers much faster.
Anyways, long arms are considered to ride better on the street (closer to stock angles) and also provide for more flex as the longer links provide a much better pivot.
There is nothing wrong with running the short arm kit, it still works very well but will have some quirks the long arm system may not.
Gears for 33s - Depends on your transmission, driving habits, and pocketbook. Some say 4.56s are perfect, some say 4.88. Need more info before I Can say for sure.
Also have you considered what you plan to do with your steering? The newer XJs are also said to be more prone to driveline vibes than the older models. Although I got away with 6" stock slip yoke and no vibes doesn't mean you will. I would budget for a SYE and custom driveshaft. Even if you don't get vibes it is a very worthwhile upgrade.