I have 2. One on my 97 put on 2 years ago and one on my 05 Rubicon put on last week. Both fit fine. I wonder if you got a bad run with a pipe bent the wrong way. My last one was on back order from Quadratec and it took awhile for it to come.
May also be related to the 4.0? I would imagine it is the same problem after seeing this on Summit Racing "Exhaust System, Cat-Back, Stainless Steel, Natural/Polished, Jeep, Wrangler, 2.5, 4.0L, Kit 51313"
Then I found this in an amazon review,
"If you have a 2000 TJ with the 2.5l 4 cylinder that has a slip on muffler, do not buy this product, Banks has it partially wrong. Use the 1999 and older kit. Jeep did make a lot of '00 TJs with the 2.5l with the older slip on CAT & muffler and Banks knows about it. The rest of the exhaust is the same high quality made parts."
Im not really impressed right now with Banks, I'm on my 4th call today, with each prior call I was on for over 20 minutes and still had people in front of me, on again now 12 minutes in, if I cant get through I'm going to just send it back and go with the Magnaflow. According to the Jeep Magazine it seem the best fit
Ive got the system on my 98 (stock suspension) and have no issues with it hitting anything. Maybe the 2000+ kits with the easy pipe connection mounts the muffler too far back and makes it come too close the the shock. I know on my setup the pipe would hit the shock if all my piping were simply slid back farther.