Mr. H, those 1500 emblems are SEVERELY defacing the value of them 8 lug axles

:-laf:-laf:-laf
Yeah, but it reduces the overall weight of the truck by close to 1,000 lbs... .

Add that and the Boggers it used to have on it, and the fact I only had $2400 in it, mostly in tires, and it makes for a nice budget wheelin' truck. I don't own it anymore, it's just sitting here for a place for it sit. Not exactly a fuel efficient daily driver... .

Oh, and that fender is the only one that has any badging left, so it's closer in average to a 3/4 ton than a 5/8 ton... .
The next issue after cutting the fender is speeding up the rust process. That may or may not bother you
Rust isn't an issue in this area, but in some it would be, and in that instance, I'd suggest some galvanizing or rust convertor type primer inside the fender where it's been cut. Those haven't even been painted in the last 7 years, but there is very little rust, despite the weekly mud runs it used to get!!
As far as a lift goes, I think the lower the better, and the bigger tire the better. That's confusing to some, but I like my center of gravity as low as possible to stay right side up. The differentials are your biggest drag, so the bigger tire, the more clearance you have. I've used adjustable track bars, either ones I've made or aftermarket. The ones in those pics are of a Fab-Tech 6" lift I got off a wrecked truck for scrap iron price in a bone yard. The upper arms are attached on the rear to the frame where the lower arms used to attach, and the lower arms are anchored to a bolt on mount that bolts through the transmission crossmember back there. IT's a decent lift, and definitely worth the $150 I gave for it. There were taller coils and shocks, too, with complete leaf springs in the rear. Did I mention the RockRam AGR steering box and hydraulic cylinder that I got with it?

Don't hate me... .

But back to the adjustable track bars. 1/2 inch may be the max you gain with the longer arms. When the axle bottoms out, it will hit the tracking bar on the diff cover, breaking or bending it... . or breaking the track bar anchor off the frame. It has to be moved forward, and then you can gain around an inch with the adjustable arms, then you lose room for the steering rods, depending on if you have the upgraded crossbar or the smaller Y setup..... When you remove the fender liner, you gain probably 1/2 to 3/4 inch between it and the fender seam/cab bolt. Sitting at stock height, 35s are about all the tire you can get, maybe a little bigger. Add 2" and you can squeeze in a 37, depending on your wheel. Move that axle forward a little and trim the fender... .
Your hubs sit out 1. 5"?!? That's pretty drastic a change, IMO. I use the Spyntec axle hubs and they move out about 1/4"... .

Oh, and in cutting the plastic liner, you'll get some real big noise when it finally does catch during compression or when backing up... . It will eventually wear through and start catching anyway, eventually jerking the whole thing out anyway... . ask me how I know. . :-laf