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For northwest trail use, the 2.5 is not a bad motor at all. Definitely better than some old carb'd V8. I have a few friends running the 2.5 and it's the very last thing on their list to upgrade. Your 1/2 ton axles are probably 10 bolts and are not worth swapping. If you want to run trails, get a Ford 8.8 rear axle. Regear to 4.88 and put lockers in. Do a SYE (slip yoke eliminator) kit on the transfercase, and you'll be good to run just about anywhere. The K5 drivetrain is not an improvement, and would be a pain in the ass to swap in.
