While I can't answer for sure about cut daystar blocks (I don't see why it wouldn't work, but cutting it straight across the bottoms would be a PITA using hand tools... you would almost want to put them in a lathe or at least a cut-off saw... just make sure that you put the little tab back in the bottom of the block so you can line the springs up properly..
I just installed the daystar lift on my 06 liberty.
The rear was straightforward, however I had to fabricate tabs to drop my brake lines... I don't know if this extends to 05 liberties, but it is a "problem" with the 06 and 07's for sure..
I found the front install was a little bit more involved.. you have to remove the battery tray to access the upper shock plate, and you have to remove the air box to access the drivers side shock plate.
I was able to do the entire lift with only removing the lower ball joint... but the second time I attacked it I did the brakes as well and it was much easier to work without the disk in the way... just zip tie your caliper to the upper control arm and make sure you keep the line out of the way when yuou start putting everything back together. (the first time I THOUGHT I was missing parts.... I wasn't but ended up doing it twice none-the-less)
Make sure you line the groove in the shock body with how it needs to go on the clevis to the top perch.
Impacts make the job much easier.
Eventually I plan to go full spring, but for now I am going to put my money into some air lockers now that I have the ground clearance issue out of the way

I hope this post helps you decide what you want to do

Mark
Running stock front shocks (with 121,000 miles on them) was not a problem