Try to have an "end game" in mind. Don't waste money doing things that you'll end up redoing later if you can avoid it. Obviously, needs and tastes change and evolve, but coming up with a plan and only doing mods that fit the plan is a good idea. For example, I wouldn't spend money on an expensive selectable locker for a 3.07 geared 10 bolt axle... if you keep building up the rig later down the road, you'll ditch that axle (or at least those gears) anyway, so put in a cheap (but perfectly acceptable) Lock Right for now.
X3 on the ORD lift system suggestions above... Tuff Country front springs and a shackle flip are awesome, but we'll start even cheaper...
You haven't mentioned your annual budget for this, but assuming you're looking for low budget/high fun/daily driver, here's my suggestions:
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A good set of 33 inch tires, trimming fenders as needed to make them fit...shouldn't take much trimming depending on the backspacing of your wheels. With 3.07's, it'll be a little weak in the acceleration department, but we're assuming low budget here, so deal with it for now.
Find out what's in the rear axle... if it's not a true locker, put in a Lock Right.
Ditch the sway bar.
Add secure recovery points front and rear. Ditching the stock bumpers for something stouter (even if it's cheap-therefore-ugly) with some tow points is the best way to do this, but at the very least go buy some D shackles or tow hooks, some steel plate, and figure out a way to make it so friends can help you out of rough spots. A buddy of mine simply cut vertical slots in the bumpers 3/8 inch by 3 inches and ran a piece of 3/8 plate steel bolted to the frame, out through the bumper, then drilled a 7/8 hole in the end of the plate and hung an anchor shackle on it...that way he's pulling directly on the frame (through some grade 8 bolts) not on the flimsy stock bumper. On a side note, ditching the stock bumpers also gives you the opportunity to "raise" the corners of the truck greatly improving the approach and departure angles at the corners too.
Invest in some gear...trail tools like maybe a Hi-lift and a good strap, and, if you're doing any rock crawling, maybe some spare parts like a rear axle shaft, a front hub, and all the stuff needed to change them on the trail. Make sure you've got a *%&$# spare tire! (You laugh, but you'd be surprised...)
Go Wheeling!!!!!
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