To quickly answer you're question about the 350 swap, yes. Yes yes yes yes yes yes yes. Yes. As for fitting 33's, like Ultimate said, 3-4.5 will do with fender trimming, but if you don't want to trim much fender, go with the Rubicon Express 5.5"
'87 XJ: Trail Rig, '94 YJ: Totaled '61 CJ5, '65-'72 CJ5 (Still working on the year):Undecided; either for parts or a yard/light trail/ toolin' around Jeep, Late '50s Willys Pickup: FOR SALE! PM ME!
Now for the goods...The '87 XJ
Before: 6" Lift, 33"x12.50" Bridgestone A/T, stock 30 and 44, BA 10/5, NP231
After:6" lift, 17/40-15 Denman Ground Hawgs, MRW Beadlocks, HP D60 Front, D60 Rear, T-18, Dana 300