One of my friends had two YJ's with 4.3L's.  One he installed from a '96 Extreme and the other he bougth for his son.  He keeps saying if he had to do over, he would have done a turbo or SC.  It took him a while to get all of it in although he went with a 4L60e and a Ford D20 while he was at it.  He also has a Taco rear end to go with it.
I'm still thinking a small turbodiesel would be the way to go.  Tons of torque, good gas mileage and fairly compact.
4.3L's aren't that great on gas.  I think the '96 I occasionaly drive gets anywere from 16-18mpg.  That's what my Jeep gets and that's not being easy on the go pedal either.  Although it's able to do 75-90 up hills easily.
I'd also check out a 3800 series and perhaps the 3800SC which is really nice.  In the early day's of the forum, everyone was wanting to do a 3.8L swap.  Even teh 3.4 or 3.6L would be a good engine.