Its a clearance issue I know that ARB makes one for the different housings.
Now wanting to spend any amount on a Dana 35 for an XJ is the real question. You know that the Dana 35 axle is an inherently weak axle and prone to failure? The axle shafts are prone to snapping at the neck down point where the splines start. The Axel tubes are prone to bending if not trussed.
Even with upgrades out there 4140 axle shafts, trusses, the cost of upgrading the axle is near the same cost of getting a waggy Dana 44 redone with a locker installed.