I also believe that your easiest and cheapest option would be to go with the 8.25. In my opinion it isn't even worth sinking money into the turdy five. I have never run one myself, but have helped buddy's that have destroyed a few. These were fairly stock rigs, used in very modest conditions. The cheap man's solution in my area is an 8.25 from the local u pull it for $100. That said, a d44 or ford 8.8 would be a stronger option in case of future upgrades. My personal preference is the 8.8, however It is the more labor intensive route and should be ( just an opinion )paired with the c-clip eliminator/chromo kit right out of the gate. If a plug n pray XJ d44 is availible in your area for a reasonable price it would be worth the extra change over the 8.25, they are unobtainium in some areas though.
As far as lockers go, I am thoroughly impressed with the new OX with the air integrated cover. I run ARB's on the CJ and decided I wanted to try something different with the XJ. I was sold on the drive away manual lock backup, and the fact that a failure would not pressurize the diff ( never had it happen, but really like the idea of it not being able to happen). I would not touch one of the older systems with the cable, but I believe OX is heading in the right direction with these air lockers. So much so I'm about to put a set on the wife's new JK.
Good luck with whatever direction that you find best suits you.