Do you ever plan to do any of these?
1. Wheel the rig
2. Put Larger tires on
3. Lock it
4. Spring over
If no to all, meaning street driven on stock tires with an open diff, and stock suspension, I would go with the D35. Nice because it just bolts in, and you see how cheap you can get them, even if it does blow.
The 8.8 swap is easy as long as you can weld, but I guess the thing about the drive shaft concerns me. The nose on the 8.8 is about 1/2" longer than the D35, so if it's tight now, it'll be tighter with the 8.8. I don't know how the fit is on a stock YJ.