Alright, I'm going to spend a little time on this.
I've done the same thing that you speak of on my daily driver. I've had my jeep for 3.5 years now, and it's been lifted the entire time I've had it. I drive about 50 miles a day to work, and weekends have put as much as 400 miles on it. I've taken a trip to Florida which was about a 1400 mile round trip. I tow a 10 foot trailer often, i've pulled boats, RV, and a 4 horse trailer with it.
The specs; '96 with auto, 4 liter, 4:56's, SYE, TW rear drive-shaft with CV, Local front drive-shaft with CV (stronger and longer than stock), 118,000 miles on the OD. The lift is about 7"s (with adj control arms and RE hd drop trac bar, ZJ pit, Currie steering) with TJ flares (minus about 4"s of sheet metal), 8.25 rear (have a no-slip, still not in it), 30 front with lock-rite and warn hubs. I have th RE drop brackets, extended brake lines including the parking brake lines. It has MT 15 x 10's with 3.5 bs, 35" trxus swampers. I've had bfg at's, and LTB swampers.
Thats just the basic list, the total weight of my XJ went from stock 4000 lbs. to 4350 with all the acces.
My gas milleage is 12 to 15 mpgs depending on trailer weight ( lowest was about 10 mpg)
ONE THING IS FOR SURE, THIS WILL NOT EVER DRIVE LIKE A CAR.
I've done some things to make driving safer and bearable. These are the things that made the XJ more drive-able as a DD.
-drop RE CA brackets (or long arms as you've mentioned) will improve the ride and rid you of DW (some will argue with that, but I spent a year and a half getting rid of DW, since the drop brackets, I've never had it again. This has also been done to 3 of my friends jeeps with the same results)
-Currie steering, BEEFY, just looking at it will make you feel safer running 35's. Increases articulation and improves steering on road. Plus it's Safer than a taxed stock set-up.
-4:56 gears, set's it to stock like performance with the auto. I think I'm going to a 4:1 in the transfer case for off-road gearing. 4:88's would give you more pulling power for trailers, and steep hills... BUT, then your RPMs are higher, gas milleage is lower, and drive-shafts need to be set-up perfectly to keep vibrations and CV wear to a minimum.
-Warn selectable hubs, these will get rid of front end vibes, steering drag from lockers, improve MPG. Really made the steering feel better on the road.
-3 core radiator, keeps things cool, and an external tranny cooler, much deserved help to the awesome AW-4.
-Rancho 9000 shocks for there adjustability. help stabilize jeep on windy days and when trailering.
-tereflex quick DC's. Don't drive with out front sway bar hooked up on the road. Don't drive with one off road.
I've driven many trucks and cars over the years. I like the way lifted jeeps feel. That is something you will have to decide if your going to do this. With 35's, there is give with the 15" rim that makes driving a concerted effort. On windy days it's a two handed effort, and most people won't want to be in either lane next to you. This is not a vehicle that you can set on cruise and fall-asleep with. It takes an effort to keep her going. You are going to learn to maintain it too, because the dealers don't like to touch them (besides they are way too expensive), and on the trail you need to fix it to get it home. Maintenence is key to longevity. I change the tranny oil once a year, engine oil every 3000 miles, diffs (depends on wheelin, water involved, every time I get her home), Coolant once a year, I take the d-shaft off every 3000 miles to grease the CV's completely (they are expensive and wear quickly if not maintained), I don't rotate tires because mine seem to wear in and changing them takes 3000 miles to get them worn back in. Besides, when the fronts wear out I can replace two insted of 4. You will need a same size spare too, because with lockers you can't run different size tires (and gears, and safety, etc...) Then you'll need to decide where to put that big spare. inside takes alot of room, on top adds to tippiness, and decreased MPG, on the back requires duckets for a tire carrier (that's where I have mine).
I've got a total of $20,000 plus in it, including $10,000 dollar purchase price. I wasted about 4 grand on 4x4 shops with the first two lifts (I've had 5 different lifts trying to get perfection for a DD) AND I"M NOT FINISHED YET!! SO... this is a serious financial commitment... NOT AN INVESTMENT. That drives me NUTS when someone says they've invested money in their 4x4. Your throwing cash out unless you can justify it with the fact that you ENJOY it. There have been plenty days when I wished I could sell it... BUT many more days that I enjoy driving it.
SAFETY... I have a 4 year old daughter and wife that ride in my XJ. Safety is very important to me. These things can be safely daily driven if you pay attention to some of the important mods ( I think I listed them up top), and drive the thing within reasonable speeds (like th speed limit) and minimize lane changeing etc. Even at the 70 mph speed limit, some days require 60 to 65 MPH due to wind and traffic. IF YOU ARE PRONE TO ROAD RAGE... get something else... an acident with excessive speed and lack of brain will get you killed and most likely some innocent bystander.
Safety Off-road... I think I need a cage inside to keep the jeep together in a roll, and damaging body flex to a minimum. An external cage to protect some of the sheet metal too... I've got 20 plus grand onto this thing. Soon to be more.
Now, my biggest concern with the cage is on the road. In an accident it could save my life, but it could also take it in a minimal collision. I work in surgery, and I've seen what the "A" pillar and roof edge can do to a head. If your cage isn't properly constructed and padded, this thing will take a rather large bite out of your noggin. That spells gork, or death to us humans.
Tires, BFG at's are the best on raod, I got 50,000 miles out of them and sold them with plenty of tread left. Off-road mud kills the at's. I live in the south, mud is an issue so I run some trxus swampers radials. They aren't bad on the road, of road they are excellent. The LTB bias swampers are awefull on the road, wande
That's my thoughts on that subject with 3.5 years of XJ experience. i hope this helps ya, but doesn't scare you away from the XJ if you really want it. I've had three jeeps and the XJ is my favorite. Careful planning will enable you to save money, and may even save your life.
Happy Jeepin' Greddy