You are correct, the bigger you get the more likely you are to break stuff - especially on stock axles. Depending on your local trails even 35's can be way over kill. I've seen the same thing that Jeffy is seeing. Not comp buggies, but guys who built trailer in rigs now switching back to street drivable YJ's on 33-35" tires because they are more fun (I'm one of them).
Now 1200 - 1600 a set for 35's that seems pretty high. My current set of MTZ's cost $740 for 4, my old 37" Iroks cost $205 each.