I would look at weighing what you can gathering to succeed at what you want to run - 35's. However, not only do you have to look into the suspension, you also have to look into the driveline. Your YJ (assuming by sign-on name) may not have the correct driveline to handle 35's on the trails, yet the street. Changing to a larger tire size requires changes in gear ratio to maintain street performance. Changes in gear ratio requires a review of axles to be used. Some axles are better than others depending on your driver's skill level, terrain type, etc. Most YJs will have the smaller front axle u-joint that has tendencies to break and take the axles (one or both) at the same time. Most YJs also have a rear axle that has tendencies to break spider gears, r&P and also rear axle shafts.
So your goal is to end up with a YJ on 35's, check out the driveline foundation first and go from there. You may want to look into your local 4wd clubs (Jeep specific if you can) and look for others that have recently upgraded their parts. You may be able to pick up some tires/wheels that are slightly larger than your stock for cheap. For clearance, there are several ways to end up with what you want. Most of the time, lift kits provide a drop bracket for the stock trans skid to maintain driveline angles. You can gain clearance there with a flat belly plate, but do to the driveline angle and the slip yoke of your tcase, a slip yoke eliminator (SYE) should be done. This provides the capability to remove the rear ds without loosing fluid out of the back of your tcase. The slip yoke of the stock 1-pce ds maintains a seal against the output housing. When you remove the rear ds, there is nothing to provide the seal. A TJ tcase is not like that.
I run a stock rear ds in my TJ. What I had done when I added a small body lift was I added an engine lift. This maintains the driveline angle to the rear axle near stock. It is better than dropping your trans skid plate. Look at it like this, lift the front or drop the rear of the engine/trans.
Its the same for adding larger and wider flares. YJ flares are smaller than TJs. If you can find a set of TJ Rubicon flares, they are even wider than the stock TJs. Wider meaning coming off the body of the Jeep.
Good luck with your project. Just note, that you will need to regear, so might as well look into lockers as well. Lunchbox style will work and can be removed easily by you (you seem to have some mechanical skills) if you prefer to go back to being open. Case lockers require resetting of the r&P. Many limited slips are similar to case lockers in that removal requires resetting. That is why I prefer the lunchbox style- LockRight, EasyLocker, Aussie, and newest is Yukon's Spartan locker.
