Any idea of what gears it has now? Yours is prime for when they were running all those stupid highway gear ratios. I personally feel that no ratio lower than 3.73 belongs on a fullsize truck with a V8...whether it makes 150hp or 400hp. GM put all these 3.55, 3.42, 3.08, and even 2.xx stuff in these 4x4 trucks in the 80's and they all got what...13-14mpg around town instead of 12-13mpg?

Sorry, personal rant of mine.
Yeah, even if the D60 needs work...it's a D60! I know people who have spent over a grand for a D60 that needed complete rebuilding. I gave up and bought a whole 1 ton truck and was done with it.
33's will indeed fit with no lift. 33x12.5R15's can be done with little to no rubbing and trimming if you run them on 15x8's with conservative backspacing (3.5-4" ish, similar to the factory wheels) or just put them on factory wheels. However good luck getting 15's to fit over those huge 1 ton 14FF drums.
You can also run narrow 33's like 285/75R16 and 255/85R16 if you run them on commonly available 16x7 wheels with similar backspacing. Keeps the tires inside the wheel wells and away from the fenders. I researched this a lot a while back when I was going to get a stock CUCV but then I ended up with mine already on 36's.
Hell, just trim to fit 35's. Guys have done it on here and the amount of trimming necessary to to fit 35's on a stock suspension isn't all that bad. If you flex the piss out of it they will rub but hey, it's a daily not a rock crawler.
I used to know a guy with a K5 from somewhere that it got rust but not as bad as they typically are here in Michigan. At some point somebody had fixed the rust by just trimming it off and rolling the fender lip up. He could fit 35's all day long and it didn't look all that bad. Was only 2" taller than stock as well.