I cut the fenders with a cut off wheel on a grinder. Use the existing body lines on the fenders and measure to get the lines where you want them. I don't try to cut the entire way through on teh first shot, I score the surface of the metal with the disk and work my way along the line, once I have the line scored, I then work my way back and forth finally cutting through. If you try and plunge the disk through, it will grab and go where it wants or explode. I did a lot of cut then test fit then cut a little more to make sure everything cleared.
I run 3" BS rims and still rub a little under compression in the front at the firewall. Should have taken more out in this area, but it really isn't that bad since there are no sharp edges to cut the tire. I would think that you could fit your setup no problem.
As for gearing, if you are going to be on the street, you will want to most likely regear, although, I don't have a problem. I would say give the stock gears a shot and see what it does, you may be ok, but it will not pull off the line very fast and 5th gear may be worthless, although I use mine at cruising speed. Hills will be a bit of a pain with stock gearing as well.
The dual cases are great for offroad, but do nothing for onroad. I have two stock cases and it works well, but with teh 4.10 axle gears it isn't slow enough for me, so I am putting 4.7 gears in teh back case to go slower.
Figure out if this will be a mostly trail truck or a DD, if trail truck run stock gears and dual cases, if DD run the 5.29 gears and a stock case or a geared case to go slower offroad. The gears do nothing until you go into 4 low, so they will not interfere with DD.
If you do dual cases, you will have to shorten your rear shaft and lengthen your front. I cut my rear down by 6.5" and welded it back up and the front I cut in half and spliced in a section of schedule 40 and welded it up to the length I needed. Has worked great so far. Your other option, like I mentioned earlier, is to go with a geared t-case, you get the benefits of low geraing without having to mess with your shafts.
Let me know if you have any other questions.