The engine is fine. A lot of people put SBCs in their rigs, but...
That transmission is really too long for a CJ5. Your driveline angle will be steep even without a lift.
The NP208 had the front output on the driver's side and your front axle is on the passenger's side.
Because CJ5s rear driveline is roughly a foot shorter than a CJ7 or Wrangler, you're really better off trying to find a good manual transmission and Dana 300 combo.
Vibration? Bump steer? Wandering? Read: Steering, suspension, and driveline basics. An article on how it works and where to look for problems.
83 CJ7, 4.1L 6cyl (4.0L bored .030" over), 35" tires, T-5 transmission, Dana 300 TC, Trussed AMC 20.