I would start with a set of aftermarket drop I-beams that will give you about 3" drop and still keep your alignment and suspension geometry right. With bags and fully dropped on the ground the tires are going to do / \ but a lot less so than if you had the stock I-beams. From what I've seen the I-beam mounts are the same between the 2wd and the 4wd. Contrary to popular belief the I-beams on the ranger are smaller than the I-beams on the explorer, from what I've seen the explorer front suspension is a cross of F150 and ranger stuff.
The radius arms should be the same between the Ranger and Explorer however the F150 ones have the shock mounts on top instead of the side. I haven't verified that they are the same between explorer and ranger so to be on the safe side I would just stick with explorer parts.
There are also subtle differences in the steering knuckles between the models. I'm still figuring out what will fit where but the explorer steering knuckles are setup to bolt the tierod ends on top of the steering arms and the ranger/F150 are setup to bolt them under the steering arms. Normally this wouldn't be a big deal but when I lowered my 93 I wanted to run the tie rod ends under the steering knuckles to reduce the angle of the steering links and help clear the sway bar however I discovered that the holes in the steering arms have a taper to them that looks a little like \/ as do the tie rod ends. I supposed they could be bashed in from the bottom but I would worry about having some slop in the steering system. Like I said I'm still trying to figure out what will work where.
Driveline wise you could just lose the front driveshaft once you pull the front axle off and leave the t-case in place.
I'm not sure about the springs or the spring mounts on the 4wd vs the 2wd.
As far as selling it to buy a 2wd goes, if you can find a good deal on a 2wd and can get decent cash for your 4wd then I would say go for it. Of course if you have a lot of money tied up in repairs and mods you might not want to get into a vehicle that you don't know the history on. You can also make a few dollars by selling the parts that you take off.
Keep an eye out for part-outs, it seems that every few months somebody is parting out a 1st gen that as been wrecked or just used up. Most of the time you can get some pretty good deals on the parts you need.
Good luck.
