You'll gain about 1" of wheelwell if you cut those out. When I did my TJ flares on my YJ, I lined them up so that I only cut the back half of the wheelwell. As the shackle flexes backward, the tire moves backwards as well (slightly). Lots of guys cut their wells evenly, but then they still rub at the rear corner.
I did mine with a 4" angle grinder and a good cutoff wheel. Then ground the edges smooth and prep'd and painted them with some rust-tough where the flares are.
My advice for anyone doing a TJ style flare on a YJ is to clamp the flare in place, mark your lines and holes with a sharpie, then remove the flare and drill the new holes