I agree with the others, there's a great big cost difference between running 33s vs 35s. Just my 2cents that 245s (~30.7") fit on an unlifted TJ, so 1"-1.25" body lift should allow you to fit 33"x10.5" KM2s. With factory wheels and swaybar, you'll need 1.25" wheel spacers to obtain front swaybar clearance. The body lift and spacers get OP almost halfway to the $500 budget.
If you do any suspension lift at all, you'll feel it in the steering and the driveline. Nevertheless, a spring rate upgrade will allow you to go faster off road and have more fun. If you're on a budget, then the greatest spring rate upgrade you can get for the least detrimental lift (~1") is Moog ZJ spring (cc-782) up front, and Moog 4Runner spring (cc-255) out back. These springs have higher posted spring rates than do most lift kits, so you get the off-road fun without the big lift (so you avoid all the other expenditures).
The springs that I recommend are dual-rate springs, meaning they have a soft spring frequency at ride height. The springs are, coincidentally, balanced on the freeway, so there's no detriment to your ride quality, but firm Bilstein 5100 shocks are a good match for these springs. With their "no-lift" 5100 shocks, you'll need to extend the rear bumpstops by 3/4". If you don't trust me on the springs, then H&R sells progressive springs that similarly upgrade your on-road and off-road performance with minimal lift.