If it is for your wife and daughter, and it is not going to do the hardcore stuff, then here would be my "low buck" version
Keep the axles, swap in some chromolly shafts, aussie lockers, regear to either 4.56 or 4.88, do a front to rear (f>r) swap (more on that below), and cut the ever living crap out of the fenders, add a spring spacer on top of the springs as needed. You will need adjustable track bars for this setup and I would probably ditch the sway bars if it is a trail only rig.
A front to rear swap is where you take the stock front springs and put them in the back, then you can buy new (or used) springs for the front... probably need 4.5" springs or so.
Now if you want to go to the next level as far as price, long arms would be the better way to go to fit the 35s and still be able to flex.
<shameless plug warning> I have a set of 4.5" lift springs for sale on here.