I was told today that as far as streetability goes ..as long as I meet the mud flap requirements along with something that extended up at least half the way over the top of the tire, I would be legal !!!

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I've seen others build fenders that are similar to the ones you might find on a motorcycle. Especially the front tire on a street bike, that me be the best example. It would mount right to the axle, wrap over and cover the tire. You would build it so it could be removed easily.
I have always thought about doing it like this. You could cover the tire almost completely and no cop could say anything. You take them off as soon as you get off road, it would only take a couple bolts to hold it secure. I thought that with a rear disc brake conversion you may be able to use some of the old drum mounting holes. I really haven't looked at that mounting possibility too hard, so it may not work. I have wheel spacers so that might be the ticket there.
Just an idea
It would be cool to be able to "street" your cruiser. Are you planning to restore it with nice paint and what not? Or is it gonna get hammered on, and wheeled to it's limit?
Good luck