I purchased a kk about a year ago and have been thinking about doing a skyjacker 2 inch lift with a stock tire size for now and just doing another spacer lift later hopefully with a 32 inch tire and regearing the axles along with a lsd/air locker in the rear while I have it apart. Is something like this been done? If so how was the ride quality and what am I looking at as far as additional parts. (brake lines, additional hardware etc.) I've regarded an xj before would it be pretty similar as far as how to do it? Is there a better more affordable way to do it?

FIRST NO NO NO on the Skyjacker, spring rate same as stock and does not hold up
SECOND no way to run 32s and only 2.5 inches of lift , you need 4 inches at least and you CAN NOT mix full spring lift kits and cheap spacer lifts unless you want junk
THIRD if going to run 32s go with the JBA adjuastable coilovers with OME springs you'll have UCA/ Spring contact
FOURTH sure you can regear ( will have to go at least 4.10s but 4/56s would be better and then add an ARB locker for instance and yes people have done that
May I suggest you do some reading first before you start? All of your questions have been answered many times over on the forums
There is no " cheaper way" to do it, well there is but you'd hate to drive your KK within a week and trade it off
Do it right the first time and be done

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MUDD'S MOTORSPORT'S We do IFS lift installs ,
03 OVERLAND EDITION /Kilby-Skidrow-Mopar-4XGuard skids/ 2.5 inch TOTAL CONTROL JBA coilovers -JBA Arms/MOABS-31 FALKEN WILDPEAK AT3W / 4.10's etc, 04 Kilimanjaro Edition loaded, plus 05 KJ limited