It's a nice looking rig. Don't freak out, yet, it doesn't sound like anything that can't be fixed. Just do a ton of reading and research and figure out what is wrong with it. Like said before, remove the spacers and go from there. I'd be willing to bet that everything (disco's, t-case drop, etc.) is set up for the 4" lift then he added the spacers after. IF this is the case once they are gone you should be ok. Either way, start there and report back.
Edit: after looking at the pic the disconnects that are on there are definitely way to short for that lift, which supports what I said above. The ends of the sway bar should be up at like a 10-15* angle, not down. I bet it nose dives pretty well when braking hard right now.
Teraflex 4" Long Arm Kit, Teraflex 1" Body Lift, M.O.R.E. 1" MML, Teraflex Belly-Up Kit, Rock Crawler 17" Wheels, 35" Toyo Open Country's, Uniden Cb, 2' Firestick Antenna