3 inch lift should be fine with 31s as long as they aren't too wide and you don't push it too much (you said family type stuff and DD, so I think that counts.)
I could probably fit 31s just fine under my "2 inch" OME lift I cobbled together by buying parts individually, my wider 32s rub a bit right now when turning sharply and I can't push the flex very far or they hit the fenders. What OME sells as a 2 inch lift spring is actually a pretty conservative number, I've been smacking them around on fairly bumpy potholed roads + minor offroading with toolboxes and spare transmissions and such bouncing around in the trunk for months now and they haven't sagged down past 2.5 or 3 inches above stock yet.
I've never done an AAL myself, but I've heard a lot of people slagging on them, and with a full set of OME front coils costing $165 and a full set of rear leafs costing $240 (OME934s and CS035RAs) I don't really see a reason to go AAL. Doing the install myself and buying the parts cost less than labor alone would have cost to have it done probably.
PS - you have a 97, anything 96 and up will require an SYE on the rear driveshaft almost guaranteed. They changed the transfer case rear output shaft slip yoke / tail housing design betwee 95 and 96 and it resulted in some XJs requiring a transfer case drop *from the dealer* to cover up vibes, especially if the UpCountry factory 1" lift package was installed.