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 the article (sticky) on Steering, suspension, and driveline.