Going to a 35" tire and lifting the rig is going to affect highway driving compared to stock configuration, no matter what you do (gas mileage will drop, speedo will need to be recalibrated, etc.). As far as fitting 35's, if you're not going to do much 4 wheeling, go with a 4" spring lift and maybe a slightly longer shackles and/or a shakle reversal. If you do a lot of 4wheeling, a spring over, while a greater expense, would give you better performance on the trail and maybe not quite the highway ride of the stock spring under axle set up. Regearing with 35's would be a good idea, I have seen plenty of people running 35's with 4:11's and the stock 2For F, I think a set of 4:56's or 4:88's would significantly improve the cruisers performance on and offf road. When it comes to engine performance you have tons of options, building up the stock 2F/F (header, bigger carb, ignition, complete rebuild, etc.), Chevrolet V8 swap, or if you really want to be cool and spend big $$$, drop a diesel in there. Basically a lot of the build up process has to do with what exactly are you going to be using the cruiser for, how big is your budget and toins of other factors I'm sure others will expand upon.