After some more wheeling this weekend and with some sloppy trails, are you sure you want to go with a larger flare? Reason is, I was climbing a soft topsoil incline. (Didn't have enough air out to get good bite with the weight shift.) The trail makes you steer left to right to left again. While trying to stay in the trail and to get bite, speedo was at 20 mpg and I was moving 1' per hour (real slow!!!), the front tires too bite and swung my sideways to a 3' dia. tree. I came within inches to contact. Any damage would be easily repaired with replacement panels, whereas custom flares are quite more expensive. My previous experience: I had a set of Bushwacker flares for a Ranger on my XJ years ago. No one made anything for the XJ in the early 90's. So I adapted. On those, I had to replace several of the flares. I could only buy per pair (front or rear). Cost was ~$250 pair.
(I'm looking at doing this - collecting information/hardware and looking for a 5-sp XL7 2wd preferred:) get rid of the rack and pinion steering. Go back to the steering box setup as this leads to a lot of different options. Next, look into dropping the front axle. Since the pinion is secured to the top of the welded crossmember, see about securing it to the underside giving some 3" drop. Then add a drop bracket/diff housing bucket for the rear portion of the control arm. The control arm's front mount is mounted to something which looks like it's bolted on. Add a spacer to that to drop that or make it part of the bucket. Since you already have the Calmini arms, look into ridding the rubber bushing and adding a heim or johnny type bushing. By relocating the rear mount (see below), this places the front mount into a bind. Heims/Johnny can be used as a misalignment bushing. Adding an upper bracket for the strut is rather easily performed and is only necessary for the lift. To gain some room for larger tires in the rear portion of the wheelwell, in the rear drop bracket configure the mount so that the control arm is swung outward (ie Hagen's front adjustment article here on Zukiworld). Did you notice that the entire front axle from hub to hub is not in a straight line? The hubs are about an 1" back from alignment. (I have pics in my album.)
Then, rather than dropping that aluminum housing, look into the Anvil so get a flange for both cv axles. Since anvil is steel, adapting is a lot easier. Getting a Trackick front housing to fit a front locker and matching gears. Then step up to the TORA cv's coming out real soon. CVs are twice as big as stock. Front is completed.
For the rear axle, you'll have to step down to the Vitara axle to gain the capability for gears/lockers. Not sure if the Vitara axle has the ds with the rubber bushing, but I would gather a guess that you could swap over the pinion ds flange to keep your stock rear ds configuration. But since you are moving axle backwards, its a mute point.
Rear lift comes from standard coils, shocks can be from an XJ front. To move the axle backwards, look at Izuzu Rodeo lower control arms. They are ~23" long, whereas XL7 ~16". You could bend then for better ground clearance and the mount will be near the rear mid body mount. If not Izuzu, aftermarket Jeep control arms have adjustability and are near ~16" long. I'm researching to find if the bushings will fit into stock XL7 mounts. For the upper control arms, I'm still researching this, but thinking something along the lines of adjustability to maintain pinion angle, so looking at the shortest control arm for the Jeep with adjustment. If lower control arms are adjustable, it's not necessary for the uppers. Track arm will be longer with adjustment and raised to be on top of the axle. Got to keep the track arm parallel as best and to keep it out of the way of other things. Not modifying the drop bracket off the frame. If this gets longer, this induces more torque arm on the drop bracket. The track arm may have to be bent to clear the diff housing since moving the rear axle backwards. There is room to do this and not interfere with the gas tank. (Not sure if the Vitara tank is any smaller if there was a need for this.)
Another obstacle, though minor could be a PITA to deal with, since front diff is engaged with pressure from an air pump, the ECM is notified when it's engaged. Why? I can only see about showing a light on the dash, but I don't know how to evaluate the program in the ECM to find out.
First thing is to determine the potential tire size. Biggest obstacle is the front floor pan for the tires. By moving the rear front control mount outward, you make that a bigger space. Thus Blacknight's comments and previous pics. I think I can not take some good pics of showing where the tires rub as my wheelwells are full of mud. The tires will clear the mud and show the rub points.
Adding wheel spacers will only introduce another problem as the tire's edges is farther out and contact is greater this way. With a different offset of wheel and tire combo, you may be able to 'squeeze' the tire right on in. Add larger lug nuts to the spindle and use your current tire wheel combo. Measure the difference out with stock and spacers to get an idea of the changes.