I run 33"X10.50" KOs on 3-1/2" lift. I could easily drop it to 3".
http://www.flickr.com/photos/lwade/sets/72157622830310636/
It took a bit of experimenting, with tires and spacers borrowed from friends, to find the right combination for my 01 XJ.
Stock alloy rims (15 X 7 w/ 4" BS) plus 1-1/4" spacers positioned the wheels in the best spots for clearance.
Trimming the fenders and flares, moving the flares up and a bit of reshaping the front inner fenders wells was required as well as a lot a adjustments to the suspension and sway bars to get everything to clear.
The bumpstops need to be properly adjusted to allow decent suspension travel, without damaging the shocks or body. Set the bumpstops up so they can be finely adjusted for maximum suspension travel.
Suspension travel---
Rear-5" up and 4" down, front- 5-1/2" up and 4-1/2" down. Not bad for being low.
With dropped brackets and well-adjusted Prothane front bumps and polyurethane rear bumps, it rides nicely without hard bottoming.
I set the bumps up so that there is a 1/2" of shock travel left after hard hits, just in case of a really bad hit that will use all of the bumpstop travel. Shocks are expensive.
The down side of going low is the limits placed on shock travel.
A 10' shock will fit on the front, if the lower mount is dropped.
The rear, on my XJ, is limited to the stock 8-1/2" travel shock due to the raised rear axle shock mounts.
Since it is still a DD, I do not want to run the shocks into the interior….yet.
Dropping the rig an inch has improved the handling and is more fun and safer to drive. I have not had any clearance problems off-road and if I do, that's what the skids are for.