Rebuilding the transfer case is not necessary. You can leave the front side bolted to the transmission adapter. Just need to split it open and change the main shaft and anything else you see that's wrong. If you want to do a full rebuild that's something else.
Proper lift of that height more or less requires a SYE, pinion shims, adjustable track bar, longer sway bar links or adjustable sway bar links, longer shocks, bump stop modifications, and probably longer brake lines.
To realize what a transfer case drop does to your Jeep, look at the motor mounts and see how they're getting pulled down. See if the exhaust all lines up. Consider that the fill plug of the transfer case is now lower so fluid level is a bit off. Rotating the pinion up (needed even for a SYE) also moves the fill plug down and risks not providing sufficient pinion lubrication. Some use aftermarket covers. Others believe the ring gear slings enough gear oil it won't matter. And the more you rotate your axle, the more the shock mounts get out of whack so relocating them is a good idea.
The extended shackles will cause the pinion to rotate up. It almost looks like its too high based on those pictures. You may need to shim it down. With a standard driveshaft the operating angles of the u-joints at each end should be the same. Allow 2 degrees on the pinion to allow for the pinion raising under torque. So if you've got 9 degrees at the transfer case, you would set it to 7 degrees at the pinion. The more you increase the operating angle of the u-joints the more you shorten their life and expose yourself to vibes. If you're going to throw out the springs you could try with the shims, but I like cal's advise to unlift until its done right.
