Am I okay to go wheeling with 32s and a Dana 35 with 3.07 gears?

3.07 sucks with 32" tires on the highway but you should be fine in 4Lo offroad. Don't try to offroad in 4Hi, that seldom works on anything other than a smooth flat dirt road.
 
Typically yes and a lower cost.

A regear would most certainly void your warranty. My guess is anything off road would void your warranty too.

I'd be looking for 2.5 TJ axles if you want to do this cheaply.

-Mac

thanks Mac - I spoke with Jasper this morning, who remanufactured the axle, and they said they off-roading would not void the warranty as that is what the axle is meant to do - as long as I'm not abusing it, I have 3 years and 100k miles - and if the axle breaks, I can pay the difference and they will send me a Dana 44 or a 35 with different gearing
 
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thanks Mac - I spoke with Jasper this morning, who remanufactured the axle, and they said they off-roading would not void the warranty as that is what the axle is meant to do - as long as I'm not abusing it, I have 3 years and 100k miles - and if the axle breaks, I can pay the difference and they will send me a Dana 44 or a 35 with different gearing

Challenge accepted!
 
My Jeep on 4” spring lift + 1.25” body lift and 35s fits in my tiny one car garage. If it were me, I’d go wheel first.

The same money you’re proposing spending might be better used with different upgrades depending on what you want to do with Jeep

Thanks - I appreciate you weighing in - I will likely just go wheeling and see how it goes since I have the warranty on the 35
 
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Thanks Mac - I have a warranty on the new axle so I may just have at it and see how it goes - I spoke with jasper who builds the axle and they say they improved on the original design - so if I break it, I'm good - I thought about upgrading the gearing to 4.10 as I'm going to stick with the 32s.

4.10 is nice on 265/75r16 with the 5 speed. I wouldn’t put larger tires with 4.10 though.