I would suggest starting with a decent 3-4" suspension lift and slip some 31x10.50R15 tires under it. That'll get you started without putting too much strain on your small stock axles.
As you progress more, you can swap to a pair of bigger axles from a '91-'94 Explorer for some added beef that'll allow you to throw bigger tires on it (regearing them accordingly, maybe throw some differential lockers in at the same time). The Explorer front D35 basically bolts in, the rear 8.8" takes a minor amount of welding for it to fit (leaf spring perches & shock mounts). With a bit of fender trimming (maybe adding on a 2" body lift too if you want), 35x12.50R15 tires should fit no problem.
As for what transmission... That's entirely up to you. Both transmissions have their advantages and drawbacks.
The auto will have the advantage if you're mud boggin' it... you won't lose all your momentum when it shifts. A manual will of course give you far better MPG on the street. For all else, it's really a preference thing (I prefer a manual myself).