my first yj was a 4 banger. i eventually had soa w/ 2" springs, 33" tires and that thing did awesome off road, with all that room, i still stuffed the tires into the fender cuz it flexed so well. and i drove it daily most of the time.
definately a dog on road, but tolerable. top speed around 65 mph. the problem is you can't step up that much with gears, the manuals already have 4.11 gears. i actually put 4.56 in the rear because they shipped me the wrong gears once, and i really didn't notice it on the street. you can go to 4.88 on aftermarket gears, but thats it for that axle.
don't bother getting more power out of that motor, nothing is gonna really make it noticeable, especially for any cost. i've heard 4.o throttle body helps. personally i like the motor, its a horse. but the 4.0 is a whole new world.