Yes you can put 4.88 gears in a stock rear end, that is the deepest gear set that will fit in the stock housings.
As far as clearance for 35" tires...It depends on what you want to do with it...Is it a street machine, mall crawler? Just mild wheeling that doesn't require actual 35" tires? Or is it a "hardcore" wheeler that does it all?
I have an 87 with a total of 8.5" of lift and 35" tires and if I flex it out, they still rub. To answer your question...if you want a hardcore wheeler...I would go with a spring over axle lift which gives you around 5-6 inches depending on the condition of the springs. And then add some TJ flares which require the fenderwell openings to be trimmed. Then you can clear the 35" tires.
'87 YJ, 4.2L built and bored, 8.5" of lift, 8.8 rear, AX15/NP 231, Tom Woods drive shafts, Flat fenders, 12,000LB winch, Custom bumpers, Rattle can paint job. Never completed...