The goals for the Jeep are: Simple, durable, reliable, highly capable and still fun to drive on pavement. I eventually want to run 37-40" tires but keep it LCG. Clearly, that will mean upgrading nearly everything and tube fenders.
Due to the money involved, I can't do it all at once and I don't want to go through a year long frame off build. I've got a little money to spend (around $1K) and I'm just trying to figure out what to do next. The Jeep in question is the one in my profile but here's a quick rundown:
258 I-6 w/Mopar-Hesco EFI - Knocks at WOT but is plenty strong, doesn't smoke and runs great. T-176 trans that takes some finesse to shift, Dana 300.
Stock axles w/ 4.10 gears, ARBs, welded tubes on rear w/ Moser 1 piece shafts. 4" SUA lift w/ shackle reversal, JKS sway bar discos, 33x12.5x15" Cooper STTs on A.R.E. Outlaw II rims.
I'm not happy that the engine knocks at WOT. It's fine off-road but inconvenient when climbing a steep hill on pavement and I sometimes have to back off when cruising at 55 mph. I can get a 5.3L-4L60e for 1K but it will easily cost me 3x that for the Dana 300 adapter, motor mounts, shifter, computer work, harness, radiator, etc.
I'm not happy with the ride quality or flexibility. It doesn't rub anywhere but the ride is really stiff (even for a lifted Jeep) and doesn't flex much at all. Great ride and flex can be had by going SOA on YJ springs but I don't want to do it with the axles I have since I'll need to upgrade anyway and doing it all at once will cost a lot more than I have. I'm not sure how to accomplish my goals by staying SUA but I'm open to suggestions.
I already have a good winch, roll cage, etc. The only place I can see upgrading the interior or body would be with rust repair, bedliner and A/C but I don't see those as high priorities.
Would you keep saving? Spend what you've got stockpiling parts? Upgrade something now?
I would worry about the knock first...fix that or do a swap, then rust repair as it seems to spread like cancer then suspension...idk what stuff cost in your area but here a motor rebuild its about 400-600
I think you will find this is the common dilemma on here. We all have great plans, but money is a limited quantity...haha. My thoughts on this are, start with reliability. It makes no sense to do anything until the Jeeps systems perform reliably. Particularly the Engine/Cooling/Electrical/Brakes. Once you have that in working order, you can at least enjoy the jeep while you stock pile. The lift and all can come later, the last thing you want is a lifted jeep that is stuck in the driveway because the engine doesn't run.
If it were me, before I'd spend all that money on the 5.3, i would rebuild the 4.2, or swap in an AMC/Jeep V8 or even a 4.0L(Which is what I have). IIRC the T18 will bolt in pretty easy in place of the T176, with an adapter for the D300 and maybe a different bell housing...
Also, if you are going spring over, I highly recommend a high steer setup. I am SOA with YJ springs and high steer, and my drag link/tierod are as parrallel as I have seen.
On the knock issue I agree about checking timing etc, as that is an easy fix, to reach reliability in the engine and get you on you way enjoying. Also, try running 89 or higher Octane. I have an old YJ that had the 4.2, it knocked about like you say yours does. For some reason that smoothed it out mostly. I have no idea why, but hey, by paying only a little extra at the pump, I never rebuilt the engine.