Ya with the 700r4 you definitely don't wanna over do it with your tire size. I think with 3.08s youd be looking at 28.5 inch tires to keep that tranny happy.
I personally would keep the lift. As well a 4" lift is just perfect for a daily driver with not to much serious off roading. with 4" your steering works out right, you don't have to extend any drive shaft lengths, keeps the drive line angles nice for longevity, keeps truck close enough to the ground to avoid towing issues, heck you don't even need extended brake lines. And it drives quite nicely down the highway compared to taller lifts. You can keep your stock swaybar with out any modification
Plus its really nice not having to jack up your truck just to do an oil change.
I have a 6" lift and I don't do to much crazy off rod stuff anymore and ive been seriously considering dropping down to a 4" just to fix the steering and drive line angles. and make it more of a factory style truck
I personally would keep the lift, put some tiny tires on there for now, and look for some 3.73-4.10 gears in some 3/4 ton axles, 1 ton if you wanna go crazy on the trails.
Way easier swapping out some axles then changing and settin up gears.
Im running 3.48s on 33s with a 700r4 but im looking for a set of 3/4 ton axles with 3.73s to run the 33s on
35s you definitely want at least 4.10s