changing the diff is more a option than a must do, most change out rear diff if they have a Dana 35 which is common in xjs unless you got lucky and got a 8.25 or a dana 44 since 35s don't hold up with bigger tires very well , I like the Dana 44 myself,which I picked up at a local junk yard for $100.
coil spring spacers aren't to bad as long as there in good shape not cracking or falling apart this is a cheaper option for a low budget build ,
since its not a extreme 4 wheeler this is a idea for your build ,
first thing I would do is a 4.5 lift rather than a 3.5 not very different in height but will benefit on your daily driving in ride quality and also would give you a option of tire sizes to use up to a 33 tire recommend A/Ts over M/Ts better gas mileage and ride and good trail tire. invest in the better rancho 9000 adjustable air ride shocks so you can choose your comfort level on the hwy and off road at touch of a button . Bushwhacker flairs are too stiff .if you rub up against a tree or just look at them wrong they'll just crack off or shatter . Would recommend skid plates for the under carriage engine compartment,oil pan,trans/transfer,fuel tank etc .
and a set of diff guards, also would change out stock ujoints with a good heavy duty aftermarket ujoint, another thing I would do is upgrade the radiator with a 3 or 4 core radiator and upgrade to a set of good set of electric fans since you mentioned running in dessert , and a good transmission cooler.
If you do your homework you can build your rig to suite your needs for under $3000.
what I mean by homework is make a list of what you want and shop around checking out lots of vendors for the best prices on certain parts
I made a big mistake by buying all my parts at once from 1 vendor than 2 months later found out if I shopped around I could have saved allot of money for other mods I wanted to do, if I didn't rush it and accumulated my parts over a few months , this way you can be sure you have everything you need to build your rig with the best parts rather than bitting the bullet spending more than you wanted in first place ,
few other things to consider
always ask others on there opinions and experience with certain parts to make sure you get the best parts for your build
don't let others talk you into doing things on your rig you weren't planning on doing
since your driving it not them and only you really know what you want for your rig and know your limits
last but not least take your time build it right but most of all have fun!!!!!!!!!!
This rig was built on a $5000. budget