I\'m currently running a TeraFlex 2.5\" spacer lift in my 2007 2-door JK. The JK style can handle 33\" tires stock (with a little rubbing at full flex) or 35\" with a small lift.
My lift only cost me approx. $350, and that is because I added the 4-door hardtop/trailer package springs to give an additional .5\" (so total about 3\" lift). This easily clears my 33\" Coopers, and I could go up to 35\" without a problem.
If you\'re looking for a tire that can get you through the daily grind, and still perform offroad, I would recommend the Cooper Discoverer STT. I\'ve been VERY impressed by their capabilities, and the only downside I\'ve read is that they chunk on hot dry rock crawling (which we don\'t get much of in NY).
If you want info on JK mods, I highly recommend perusing jkowners.com. There are a lot of friendly and helpful people over there.
i also have an Aussie Locker in the front diff. It has drastically improved the offroad capabilities of the stock JK, and I have not noticed any issues with handling in the winter. in 4x4, there might be a slight hint of understeer, but I\'m aware of the possibility and compensate for it.
I\'d put the selectable in the rear as that diff is running all the time.
Here\'s how it sits now.
http://www.frontiernet.net/~ripclaw/DCP_1944-1024.jpg