Personally, I feel that the SYE is a better solution than a transfer case drop.
My rational is that by altering the angle at which the engine sits via the case drop, extra load is placed upon the engine mounts which will lead to premature failure.
Transfercase drops also increase the operating angle of the transfercase's front u-joint. For a low, 2" drop, the changes in angles doesn't seem to critical, letting TC drops work OK in most cases.
The best thing you can say about TC drops is that they are cheap, SYE kits are not.
A 2' lift is right on the border of needing additional upgrades such as control arms and a trac bar. The stock CAs will work for mild off-roading but can fold it you beat them too hard in rocks. A short transfer case drop, along with rear axle shims, will work, just not as smoothly as an SYE kit.
The trac-bar axle mount can be redrilled and be OK as long as the lift doesn't grow taller later. That would require an adjustable trac-bar.
When I was first owned my 2001 XJ, I was lucky to find Go Jeeps website.
http://jeep-xj.info/
It has a huge amount of XJ projects that gave me a good XJ perspective and lots to think about. Many of his upgrades are relatively inexpensive, a consideration if money is tight. Building an XJ can cost much more than you would think is possible.
The webite's author is a mechanic who has used his XJ extensively for touring the outback of Australia for over decade, while towing a tent trailer ,so his ideas have a lot of hard miles backing them up. He is still active, posting over on Yahoo's "xjlist" forum. Some of his ideas you may use
WJs CAs used as LCA replacements
http://jeep-xj.info/HowtoWJcontrolarms.htm
The trac bar's axle mount can be re-drilled to move the bar over, centering the front axle.
http://jeep-xj.info/HowtoTrackbar.htm
Transfercase drop
http://jeep-xj.info/HowtoTCdrop.htm
All of the above said, if you have the money, upgrading the spring, shocks, CAs, trac-bar and adding a SYE kit will give the best performing, most dependable vehicle, if it is assembled and adjusted correctly.
The SYE, CAs and trac-bar will not go to waste when you get inflected with inchitis, an incurable disease.
I wish i could have predicted the future when I first bought the XJ, ten years ago. I could have saved a lot of money going directly to what I ended up with today but who knew? Probably 95% of us have done the same. Few of us really knew what we wanted or what would be needed to have a highly capable machine.
Along the way, the slow evolution has be very educational, so it wasn't wasted time. Now money on the other hand.....