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I'm doing that right now on my 85 2wd, I don't know were your at but here in California smog and insurance have nothing to do with the conversion. If you were to swap frames then you would have a problem with the dmv. The only tricky part so far is deciding how I want to mount the crossmember for the transfercase
cut off IFS, swap 2wd tranny for 4wd tranny and t-case, add soild front axle.