Well, I don't know about the knuckles being weaker. They're bigger and they're designed and attached the same way as the mini truck knuckles.
I'm not sure what the diamond axles cost, but that may be a better way of going. The steering issue is a PIA to make strong and reliable.
No, the arms are not welded on my setup. I built my own arms using the 2 stock mounting bolts, then I welded a gusset on the top of the knuckle that fit up against the arm to support the lateral loading. I also had bolts that came through those gussets into the arm from the side to try and tie everything togeather and make it as strong as possible. I never had one break, but until I had at least 5 years of wheelin I can't say if it was a good setup or not.
I can say that if I was going to build another heavy rig like a runner that I would just go with a dana 60 right from the begining and if I was building a lighter weight pickup I'd use a mini front with longs.
