Hee hee hee. Luke, I am your father!! Darkside a cometh!! :lol: 8)
I'm happy that I could add to your bank account depletion and jeep addiction. I think you made a great choice in getting an XJ. I'll be getting a short wheelbase someday too!
You should be able to find a late 80's XJ, or if you're lucky something newer for that money. Check out autotrader.com too! I remember when I was looking for one, I saw a ton. You may have to travel though, but for a good deal it's worth it!
87 and 88, I believe they offered the dana 44 rear end on a few models. But I found that finding one of those is like stumbling on gold. I did find one in Mexico, but it was sooooo rusted and ruined. The 44 wasn't even worth it.
Three axels are available: the dana 35 and 44, and the Chryler 8.25. Beware the 8.25, good axel, but they don't make ALL of the gear ratios for them. Namely, 4.88 gears. (i found out the hard way)
Gears: pretty much the same rules apply to XJ's as YJ's and TJ's. 32 and 33" wheels, you might go with 4.56 gears. If you don't go that big, stock 3.55 works great, but you'll still want to go to atleast4.10.
lift: 4.5 for 32 or 33" tires. 3" lift for 31's.
I don't have to tell you to avoid the 2.5l, stick with the 4.0.
Check out these sites for Lifts, engine performance etc.
http://www.rustysoffroad.com/
http://www.rubiconexpress.com/
Welcome to the Cherokee part of the tech forums!!