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.